Smarten Power Systems Ltd Management Discussions

(15) Working capital Days= Average working capital/ revenue from operations *365

Our business is subjected to various risks and uncertainties, including those discussed in the section titled <Risk Factors" on page 31. Our results of operations and financial conditions are affected by numerous factor including the following:

• Our business is highly dependent on certain raw materials and any disruption or failure of our supply chain systems may affect our operations.

• Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance.

• Ability to retain our skilled personnel;

• Performance of Companys competitors;

• Significant developments in Indias economic and fiscal policies;

• Volatility in the Indian and global capital market;

• Implementing potential forward integration and backward integration strategies, such as vertical expansion into solar panel manufacturing or installation services, acquisition of battery manufacturing plant can

significantly influence our operational results;

• Failure to renew distribution agreements with our distributors may include decreased revenue, loss of market share, and potential disruptions in supply chain logistics;

• Reliance on imports for raw materials and components can lead to increased costs due to currency fluctuations, tariffs, and supply chain disruptions, potentially impacting profitability and competitive pricing.

• We are subject to foreign currency exchange rate fluctuation that can lead to financial losses. For details regarding foreign exchange exposure of our company, see "Risk Factors " on page 31.

For Significant accounting policies please refer "Significant Accounting Policies to the Restated Consolidated

Financial Statements", under Section titled ‘‘Restated Consolidated Financial Statements" beginning on page 202.

Our revenue and expenses are reported in the following manner:

Our Companys revenue is primarily generated from Sale of Products and Sale of Services. (for more details see

"Our Business " on page 133.

Our other income mainly consists of duty drawback, other export incentives, forex gain, recovery of freight expenses from customers and other non-operating income.

Our total expenditure primarily consists of purchases of raw materials and stock in trade, employee benefit expenses, financial expenses, depreciation & amortization expenses and other administrative expenses.

Our cost of material consumed mainly includes purchase of stock of raw materials like Transformers, Print Circuit Board (PCB), Electrification Wires among others.

Our cost of purchase of stock in trade is mainly attributable towards our trading business of Batteries and Solar

Panels.

Change in inventories comprises of increase/ (decrease) in stock of raw materials, finished goods and stock in trade.

Our employee benefit expenses mainly include salaries and wages, contribution to provident and other funds and staff welfare expenses.

Our finance costs mainly include interest expenses and bank charges.

Depreciation and Amortisation expense includes depreciation.

It includes Payment for Scheme & Discount, Commission expenses, sales promotion related expenses, freight expenses, transportation expenses, travelling expenses, rent expenses, insurance expenses, CSR Expenses and other miscellaneous expenses.

Revenue from Operation has increased by Rs. 655.29 Lakhs and 3.36% from Rs. 19,519.57 Lakhs in the fiscal year ended March 31, 2024 to Rs. 20,174.85 Lakhs in the fiscal year ended March 31, 2025. Revenue from Operation had 99.65% contribution from Sale of Products and 0.35% from Sale of Services in fiscal year 2025. A detailed category-wise breakup of our Revenue from Operations is mentioned in the table below: -

Other Income reduced by (Rs. 208.81) Lakhs and (59.05%), from Rs. 353.63 Lakhs in the fiscal year ended March 31, 2024 to Rs. 144.82 Lakhs in the fiscal year ended March 31, 2025. This decrease was mainly due to reduction in recovery of freight expenses from customers by Rs. 150.39 Lakhs and (100.00%), from Rs. 150.39 Lakhs in the fiscal year ended March 31, 2024 to nothing in the fiscal year ended March 31, 2025.

Total Expenses marginally increased by Rs. 339.92 Lakhs and 1.86%, from Rs. 18,264.27 Lakhs in the fiscal year ended March 31, 2024 to Rs. 18,604.20 Lakhs in the fiscal year ended March 31, 2025. This increase was mainly due to increase in volume of operation and expenses incurred for future growth during the Fiscal Year. Total expenses reduced as a % of total revenue from 91.90% in fiscal year ended March 31, 2024 to 91.56% in fiscal year ended March 31, 2025.

Cost of Material Consumed decreased by Rs.179.48 Lakhs and (2.38%) from Rs. 7,535.16 Lakhs in the fiscal year ended March 31, 2024 to Rs. 7,355.68 Lakhs in the fiscal year ended March 31, 2025 this slight decrease in material costs was primarily driven by the optimization of material usage implemented in the fiscal 2023 had started delivering further benefits in the current year. The cost of Material Consumed decreased as a percentage of total revenue from 37.92% in the fiscal year ended March 31, 2024 to 36.20% in the fiscal year ended March 31, 2025.

Purchase of stock in trade increased by Rs. 2,110.99 Lakhs and 32.33% from Rs. 6,530.46 Lakhs in the fiscal year ended March 31, 2024 to Rs. 8,641.45 Lakhs in the fiscal year ended March 31, 2025 and as a percentage of total revenue from 32.86% in the fiscal year ended March 31, 2024 to 42.53% in the fiscal year ended March 31, 2025. This increase in stock purchases was primarily due to excessive demand of Batteries which is a traded component for the company. As a result, sales from Batteries has grown by 31.93% in fiscal year ended March 31, 2025.

Changes in Inventories was at Rs. (602.75) Lakhs in the fiscal year ended March 31, 2025, compared to Rs. 844.69 Lakhs in the fiscal year ended March 31, 2024. This significant decrease in the expense was primarily attributable due to higher inventory of finished goods and raw materials held during peak demand seasons.

Employee Benefit Expenses increased by Rs. 279.47 Lakhs and 22.93% from Rs. 1,219.03 Lakhs in the fiscal year ended March 31, 2024 to Rs. 1,498.49 Lakhs in the fiscal year ended March 31, 2025. This increase was primarily due to increase in Salaries and wages by Rs. 255.42 Lakhs from Rs. 1,120.75 Lakhs in fiscal year ended March 31, 2024 to Rs. 1,376.17 Lakhs in fiscal year ended March 31, 2025.

Finance Costs increased by Rs. 20.46 Lakhs and 34.10% from Rs. 60.01 Lakhs in the fiscal year ended March 31, 2024 to Rs. 80.48 Lakhs in the fiscal year ended March 31, 2025. The increase was mainly because of increase in interest expenses on Overdraft facility and sanction of a new term loan.

Depreciation and Amortisation Expense marginally increased by Rs. 1.70 Lakhs and 4.35% from Rs. 39.14 Lakhs in the fiscal year ended March 31, 2024 to Rs. 40.84 Lakhs in the fiscal year ended March 31, 2025.

Administrative and Other Expenses decreased by Rs. 445.78 Lakhs and (21.90%) from Rs. 2,035.78 Lakhs in the fiscal year ended March 31, 2024 to Rs. 1,590.01 Lakhs in the fiscal year ended March 31, 2025. This is primarily attributable due to decrease in Legal & Professional Charges by Rs. 113.55 Lakhs from Rs. 210.91 Lakhs in fiscal year ended March 31, 2024 to Rs. 97.36 Lakhs in fiscal year ended March 31, 2024 and decrease in Commission

expense by Rs. 230.99 Lakhs.

EBITDA has increased by Rs. 128.72 Lakhs and 7.54% from Rs. 1,708.08 Lakhs in the fiscal year ended March 31, 2024 to Rs. 1,836.80 Lakhs in the fiscal year ended March 31, 2025.

Net Profit has increased by Rs. 148.04 Lakhs and 13.11% from Rs. 1,129.00 Lakhs in the fiscal year ended March 31, 2024 to profit of Rs. 1,277.04 Lakhs in the fiscal year ended March 31, 2025. Net profit had increased due factors mentioned above.

Revenue from Operation has increased by Rs. 1,526.08 Lakhs and 8.48% from Rs. 17,993.49 Lakhs in the fiscal year ended March 31, 2023 to Rs. 19,519.57 Lakhs in the fiscal year ended March 31, 2024. Revenue from Operation had 99.65% contribution from Sale of Products and 0.35% from Sale of Services in fiscal year 2024. A detailed category-wise breakup of our Revenue from Operations is mentioned in the table below: -

Other Income reduced by (Rs. 259.16) Lakhs and (42.29%), from Rs. 612.79 Lakhs in the fiscal year ended March 31, 2023 to Rs. 353.63 Lakhs in the fiscal year ended March 31, 2024. This decrease was mainly due to reduction in recovery of freight expenses from customers by Rs. 171.32 Lakhs from and (53.25%), from Rs. 321.72 Lakhs in the fiscal year ended March 31, 2023 to Rs. 150.39 Lakhs in the fiscal year ended March 31, 2024.

Total Expenses marginally increased by Rs. 378.89 Lakhs and 2.12%, from Rs. 17,885.38 Lakhs in the fiscal year ended March 31, 2023 to Rs. 18,264.27 Lakhs in the fiscal year ended March 31, 2024. This increase was mainly due to increase in volume of operation and expenses incurred for future growth during the Fiscal Year. Total expenses reduced as a % of total revenue from 96.13% in fiscal year ended March 31, 2023 to 91.90% in fiscal year ended March 31, 2024.

Cost of Material Consumed increased by Rs. 54.73 Lakhs and 0.73% from Rs. 7,480.42 Lakhs in the fiscal year ended March 31, 2023 to Rs. 7,535.16 Lakhs in the fiscal year ended March 31, 2024 this slight increase in material costs was primarily driven by the higher purchase of raw materials as safety stock. The cost of Material Consumed decreased as a percentage of total revenue from 40.20% in the fiscal year ended March 31, 2023 to 37.92% in the fiscal year ended March 31, 2024. This was primarily driven by the rise in both the volume and value of export sales, which grew from 31.73% to 35.71% of the total revenue. Furthermore, the optimization of material usage implemented in the previous year had started delivering further benefits in the current year.

Purchase of stock in trade decreased by Rs. 1,125.84 Lakhs and (14.70%) from Rs. 7,656.31 Lakhs in the fiscal year ended March 31, 2023 to Rs. 6,530.46 Lakhs in the fiscal year ended March 31, 2024 and as a percentage of total revenue from 41.15% in the fiscal year ended March 31, 2023 to 32.86% in the fiscal year ended March 31, 2024. This reduction in stock purchases was primarily due to the availability of ^1,341.19 Lakhs worth of Finished Goods already in inventory at the beginning of the fiscal year. These finished goods, which were already stocked, helped the company meet market demand without the need to procure additional stock, thereby reducing the overall purchases for the year.

Changes in Inventories was at Rs. 844.69 Lakhs in the fiscal year ended March 31, 2024, compared to Rs. (750.96) Lakhs in the fiscal year ended March 31, 2023. This significant increase in the expense was primarily attributable to the sale of inventory held as at fiscal year ended March 31, 2023.The company held lower closing stock of finished goods in FY ended March 31,2024, due to the earlier onset of peak demand season. The company had held higher closing inventory in FY 23 in anticipation of demand for FY 24 as a result, the company was able to enjoy a higher margin in FY 24.

Employee Benefit Expenses marginally increased by Rs. 41.65 Lakhs and 6.13% from Rs. 1,177.38 Lakhs in the fiscal year ended March 31, 2023 to Rs. 1,219.03 Lakhs in the fiscal year ended March 31, 2024. This increase was primarily due to increase in Salaries and wages by Rs. 38.95 Lakhs from Rs. 1,081.79 Lakhs in fiscal year ended March 31, 2023 to Rs.1,120.75 Lakhs in fiscal year ended March 31, 2024.

Finance Costs increased by Rs. 20.92 Lakhs and 53.51% from Rs. 39.09 Lakhs in the fiscal year ended March 31, 2023 to Rs. 60.01 Lakhs in the fiscal year ended March 31, 2024. The increase was mainly because of increase in interest expenses on Overdraft facility and sanction of a new term loan.

Depreciation and Amortisation Expense marginally increased by Rs. 0.24 Lakhs and 0.20% from Rs. 38.90 Lakhs in the fiscal year ended March 31, 2023 to Rs. 39.14 Lakhs in the fiscal year ended March 31, 2024.

Administrative and Other Expenses decreased by Rs. 208.46 Lakhs and (9.29%) from Rs. 2,244.24 Lakhs in the fiscal year ended March 31, 2023 to Rs. 2,035.78 Lakhs in the fiscal year ended March 31, 2024. This is primarily attributable due to decrease in warranty and services expenses by Rs. 423.59 Lakhs from Rs. 478.24 Lakhs in fiscal year ended March 31, 2023 to Rs. 54.65 Lakhs in fiscal year ended March 31, 2023 and increase in Legal & Professional Charges by Rs. 210.91 Lakhs.

EBITDA has increased by Rs. 909.19 Lakhs and 113.81% from Rs. 798.89 Lakhs in the fiscal year ended March 31, 2023 to Rs. 1,708.08 Lakhs in the fiscal year ended March 31, 2024.

Net Profit has increased by Rs. 613.34 Lakhs and 118.94% from Rs. 515.66 Lakhs in the fiscal year ended March 31, 2023 to profit of Rs. 1,129.00 Lakhs in the fiscal year ended March 31, 2024. Net profit had increased due factors mentioned above.

For additional ratios, please refer Section titled "Other Financial Information " on page 203.

The table below summaries our cash flows from our Restated Consolidated Financial Statements for the 9 month period ended December 31, 2024 and financial years ended March 31, 2024, March 31, 2023 and March 31, 2022.

Net cash flow generated from our operating activities was Rs. (251.02) Lakhs for the fiscal year ended March 31, 2025. Our operating cash flow before working capital changes was Rs. 1,836.79 Lakhs for the fiscal year ended March 31, 2025, which was the result of the profit before tax for the period of Rs. 1,715.47 Lakhs adjusted primarily for depreciation and amortization expenses of Rs. 40.84 Lakhs and interest expense of Rs. 80.48 Lakhs. The working capital adjustments included a decrease in deferred tax assets of Rs. 29.13 Lakhs, a decrease in trade payables of Rs. 433.59 Lakhs, an increase in other current / non-current liabilities of Rs. 96.25 Lakhs, a decrease in provisions of Rs. 131.40 Lakhs, an increase in loans and advances of Rs. 215.77 Lakhs, an increase in inventories of Rs. 1,133.68 Lakhs, a decrease in trade receivables of Rs. 447.21 Lakhs, and an increase in other current / non-current assets of Rs. 249.28 Lakhs. The company paid net Taxes of Rs. 438.43 Lakhs in fiscal year ended March 31, 2024.

Net cash flow generated from our operating activities was Rs. 16.34 Lakhs for the fiscal year ended March 31, 2024. Our operating cash flow before working capital changes was Rs. 1,708.08 Lakhs in the fiscal year ended March 31, 2024, which was the result of the profit before tax for the period of Rs. 1,608.93 Lakhs adjusted primarily for depreciation and amortization expenses of Rs. 39.14 Lakhs and interest expense of Rs. 60.01 Lakhs. The working capital adjustments included an increase in deferred tax assets of Rs. 17.48 Lakhs, a decrease in trade p ayables of Rs. 1,213.13 Lakhs, an increase in other current / non-current liabilities of Rs. 39.71 Lakhs, an increase in provisions of Rs. 112.34 Lakhs, an increase in loans and advances of Rs. 32.66 Lakhs, an increase in inventories of Rs. 781.77 Lakhs, a decrease in trade receivables of Rs. 1,045.78 Lakhs, and an increase in other current / non-current assets of Rs. 63.14 Lakhs. The company paid net Taxes of Rs. 479.93 Lakhs in fiscal year ended March 31, 2024.

Net cash flow generated from our operating activities was Rs. (253.77) Lakhs for the fiscal year ended March 31, 2023. Our operating cash flow before working capital changes was Rs. 798.89 Lakhs in the fiscal year ended March 31, 2023, which was the result of the profit before tax for the period of Rs. 720.90 Lakhs adjusted primarily for depreciation and amortization expense of Rs. 38.90 Lakhs and interest expense of Rs. 39.09 Lakhs. The working capital adjustments included an increase in deferred tax assets of Rs. 3.72 Lakhs, an increase in trade payables of Rs. 75.10 Lakhs, an increase in other current / non-current liabilities of Rs. 166.99 Lakhs, an increase in provisions of Rs. 394.38 Lakhs, a decrease in loans and advances of Rs. 3.53 Lakhs, a decrease in inventories of Rs. 997.64 Lakhs, a decrease in trade receivables of Rs. 495.96 Lakhs, and an increase in other current / non-current assets of Rs. 9.51 Lakhs. The company paid net Taxes of Rs. 205.23 Lakhs in fiscal year ended March 31, 2023.

Net cash flow from investing activities was Rs. (579.99) Lakhs for the fiscal year ended March 31, 2025. This reflected capital expenditure made towards the purchase of property, plant, and equipment of Rs. 382.82 Lakhs and capital advances of Rs. 197.17 Lakhs.

Net cash flow from investing activities was Rs. (149.91) Lakhs for the fiscal year ended March 31, 2024. This reflected capital expenditure made towards the purchase of property, plant, and equipment of Rs. 135.61 Lakhs and outflow due to long term capital advances of Rs. 14.29 Lakhs.

Net cash flow from investing activities was Rs. (35.42) Lakhs for the fiscal year ended March 31, 2023. This reflected capital expenditure made towards the purchase of property, plant, and equipment of Rs. 35.42 Lakhs.

Net cash flow from financing activities was Rs. 910.67 Lakhs for the fiscal year ended March 31, 2025. This reflected due to an increase of borrowings of Rs. 991.15 Lakhs and interest paid of Rs. 80.48 Lakhs.

Net cash flow from financing activities was Rs. 194.70 Lakhs for the fiscal year ended March 31, 2024. This reflected due to an increase in borrowing of Rs. 254.71 Lakhs and interest paid of Rs. 60.01 Lakhs.

Net cash flow from financing activities was Rs. 208.52 Lakhs for the fiscal year ended March 31, 2023. This reflected due to an increase in borrowing of Rs. 171.67 Lakhs, interest paid of Rs. 39.09 Lakhs and proceeds from issue of Equity Shares of Rs. 75.95 Lakhs.

Except as described in this Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

Other than as described in the section titled "Risk Factors" on page 31, to our knowledge there are no known significant economic changes that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

Other than as described in this Prospectus, particularly in the sections "Risk Factors" and "Managements Discussion and Analysis of Financial Condition and Results of Operations" on pages 31 and 204, respectively, to our knowledge, there are no known trends or uncertainties that are expected to have a material adverse impact on our revenues or income from continuing operations.

Income and sales of our Company on account of major activities derives from Sale of Products and Sale of Services.

Our Companys future costs and revenues can be impacted by an increase in employee costs as the Company looks to hire talent with new skills and capabilities for the advertising industry who may be in short supply.

Our Companys future costs and revenues will be determined by competition, demand/supply situation, Indian Government Policies, foreign exchange rates and interest rates quoted by banks & others.

Increases in our revenues are by and large linked to increases in the volume of business.

The Company is operating in Home UPS, Solar Inverters/Solar Power Conditioning Units (PCUs), Battery and Solar panels. Relevant industry data, as available, has been included in the chapter titled "Industry Overview " on page 119.

Our Companys business is seasonal with majority of the demand picking up in mid of March till end of June, i.e. the summer season.

Our Company has not announced any new services and product and segment / scheme, other than disclosure in this Prospectus.

Our Company was not significantly dependent on top 10 customers. For further details, see "Riskfactor" and "Our Business " on page 133.

We face competition from existing and potential competitors which is common for any business. We have, over a period of time, developed certain competitive strengths which have been discussed in section titled "Our Business" on page 133.

In the opinion of the Board of Directors of our Company, since the date of the last audited period i.e., March 31, 2025 as disclosed in this Prospectus, there have not arisen any circumstance that materially or adversely affect or are likely to affect the trading or profitability of our Company or the value of its assets or its ability to pay its material liabilities within the next twelve months except as follows:

Our Company has received a renewed Credit Arrangement Letter from ICICI Bank Limited, dated April 28, 2025. The revised credit facilities are as follows:

a) The Term Loan limit has been revised from Rs. 600.00 Lakhs to Rs. 589.90 Lakhs.

b) The limits under the Export Packaging Credit Facility and the Overdraft Facility remain unchanged at Rs. 700.00 Lakhs and Rs. 690.00 Lakhs, respectively.

c) A new non-fund-based facility of Rs. 800.00 Lakhs has been sanctioned in the form of a Letter of Credit.