solex energy ltd Management discussions

This report encompasses the operational and financial performance of the Company for the fiscal year ending on March 31, 2023, and is an integral part of the Annual Report.

INDUSTRY STRUCTURE AND DEVELOPMENT

Solex Energy Limited, headquartered in Gujarat, India, stands as a prominent solar photovoltaic module manufacturer. With the capability to produce modules using advanced MONO PERC and TOP-Con technology, Solex offers a diverse product range including Monofacial and Bi-facial modules across various power capacities. The company is well-prepared to tackle the challenges presented by the current dynamic market conditions. The addition of production capacity this year has boosted our confidence levels. Market dynamics have introduced fluctuations in raw material pricing, which in turn has influenced the final products trend. Customers are increasingly focused on cost-saving measures and alternative solutions, an area where Solex consistently provides optimal solutions.

*Renewable Energy Landscape in India:

? The Ministry of New and Renewable Energy (MNRE) has achieved 227 GW of renewable energy capacity by 2022. ? Allocation: Around 114 GW for solar, 67 GW for wind, and additional capacities for hydro and bioenergy. ? Remarkable Growth: Solar power installed capacity increased 25-fold from 2.6 GW to 66.8 GW since 2014. ? Investment Projection: Solar sector expected to attract US$ 80 billion investment in the next four years. ? Future Projections: Anticipated 49% of total electricity generation from renewable sources by 2040.

*Solar Energy Cost and Savings:

? Adoption of efficient batteries for electricity storage to drive a 66% reduction in solar energy costs. ? Transition to renewables over coal estimated to save India Rs. 54,000 crores (US$ 8.43 billion) annually.

*Renewable Energy Capacity Goals:

? Projected to account for 55% of overall installed power capacity by 2030.

? Contribution to power generation expected to rise from 18% to 44% by 2029-30 (CEA estimates). ? India targeting installed renewable energy capacity of 450 GW by 2030, with solar contributing over 60% (about 280 GW).

*Union Cabinet Initiatives:

? Aim: Establish 74 GW fully integrated solar PV module manufacturing capacity. ? Expected Employment: Direct employment for around 30,000 individuals, indirect employment for about 120,000.

? Focus: Import substitution, bringing back INR 17,500 crore into the economy annually, emphasis on R&D. ? Union Budget Allocation: Rs. 1,000 crores ($132 million) to Solar Energy Corporation of India (SECI), Rs. 19,500 crores ($2.57 billion) for PLI scheme.

*Renewable Energy Progress:

? Current renewable energy capacity at 101.53 GW, representing 38% of overall installed power capacity. ? Goal: Achieve 450 GW of installed renewable energy capacity by 2030, with solar contributing over 60% (about 280 GW). ? Rooftop Solar Programme Phase II: Plan to install 4,000 MW RTS capacity in the residential sector, with subsidy provision.

*Global Recognition and Outlook:

? India ranked 3rd globally for renewable energy investments and plans in 2022 (British Business Energy). ? Expected significant transformations in the electricity sector in terms of demand, growth, energy mix, and market operations during the current decade (2020-2029).

*The data mentioned above has been sourced from https://www.ibef.org/industry/renewable-energy.

OPPORTUNITIES & THREATS

While we recognize the individual uniqueness of each business in their thinking, objectives, and resources, the present timing appears opportune to allow them to function independently. The past year stands as evidence of our commitment to a long-term business approach across strategy, operations, and sustainability. Following careful consideration, we believe that the independent recognition of our businesses, as previously explained, represents the most efficient and sustainable path forward. This approach aligns with the "SOLEX ENERGY" mission, emphasizing the enhancement of customer product value through the delivery of the highest quality and an ongoing commitment to quality improvement.

Indias power sector exhibits significant diversity on a global scale. Particularly in the realm of renewable energy, notably solar energy, India holds a prominent position, both nationally and internationally. With our operations embedded in this sector, we anticipate a promising future. The Indian governments persistent efforts to encourage the utilization of solar and renewable energy sources further amplify the sectors potential.

The inherent strengths of our company include our current scale of operations, future development plans, cost-effectiveness, and adherence to international standards. These strengths collectively provide us with an unparalleled platform for enhanced competitiveness. As we embark on expanding our production capacity this year, we anticipate improved operational flexibility and optimal resource utilization. Our unwavering focus remains on delivering superior value to our customers, upholding international quality standards across all products and services. Solex is proud to consistently meet and exceed global benchmarks in product quality and manufacturing, positioning us as a prime candidate for the export of PV modules to numerous international markets. The current year presents a multitude of noteworthy opportunities for Indias solar PV market. The ongoing decline in global supplies emerging from China, coupled with the strategic shift of multinational corporations adopting the "China plus one" strategy, is unlocking diverse avenues for Indian entities to emerge as attractive alternatives.

The Indian solar power market is poised for substantial growth, with a projected CAGR of over 40% within the forecast period of 2020-2025. This growth is driven by factors such as the diminishing costs of solar modules and government policies that permit 100% FDI under the automatic route for renewable power generation and distribution projects. This policy adjustment is expected to attract heightened participation from global players in the Indian market. Additionally, the significant drop in solar technology prices in recent years has been a pivotal driver behind the widespread adoption of solar PV systems across the country.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE

The Company exclusively operates within a single segment. Consequently, segment-wise performance evaluation is not applicable.

OUTLOOK

The Companys outlook remains consistently stable and progressively optimistic. Our initiatives to curtail overheads and financial costs, foster strong relationships with customers, vendors, and employees through ethical and transparent working systems, and elevate production process standards within our existing product lines, will enhance production efficiency without compromising quality. This concerted effort also extends to optimizing operating parameters and costs, equipping the Company to navigate potential challenges effectively. The outlook for both domestic and export ventures is exceedingly promising. Solex is well-positioned to engage in exports to European and North American markets. To achieve this goal, our participation in events such as The Smarter E (Intersolar) Europe exhibition held in Munich, Germany in June 2023 is noteworthy. Additionally, we have plans for participation in RE+ in September in the USA, REI-2023 in October-2023 at Noida and The Smarter E (Intersolar) Gandhinagar in January-2024 in India. For the ongoing year, a strategically devised promotional plan is in place to amplify sales and establish our presence on the global solar map in the near future.

Solex stands as an Original Equipment Manufacturer (OEM) for various Indian and International companies. Our partnerships are exemplified by MoUs with multiple Domestic and International brands for module manufacturing, encompassing both material-based collaborations and job work arrangements.

Solex modules have garnered an array of esteemed certifications and qualifications, underscoring our steadfast commitment to quality. These certifications ensure that our solar photovoltaic modules align with the most rigorous standards of safety, performance, reliability, and international compliance. Notably, Solex Modules have also secured certification from the Bureau of Indian Standards (BIS), earning inclusion in the Approved List of Models and Manufacturers (ALMM).

RISK MANAGEMENT

The renewable energy sector is characterized by specific risk attributes that necessitate careful evaluation and mitigation. Solex has proactively devised a Risk Management Plan to effectively address these challenges, which is strictly adhered to. This comprehensive risk management approach encompasses various aspects, including capital investment, competitor activities, and the emergence of new market entrants. Continued reforms and a focus on technological advancements are anticipated to curtail risk exposure. The significant cost implications associated with certifications have prompted cautious consideration, as the addition of new product certifications could potentially escalate production costs, influencing pricing dynamics.

INTERNAL CONTROL SYSTEM

The Company places paramount importance on a robust internal control framework, essential for fostering business efficiency, ensuring effective management, and safeguarding valuable assets. A well-defined internal control system is firmly entrenched within the organization. This system is intricately designed to provide reasonable assurance regarding operational and financial control. The Companys Management is unwaveringly committed to ensuring the establishment of Internal Financial Control, with controls that are both adequate and effectively operational.

The role of the Internal Auditors is pivotal, as they assess the effectiveness and adequacy of the internal control system. This evaluation extends to the systems compliance with operational procedures, Company policies, and accounting protocols at all Company locations. Based on the findings provided by Internal Auditors, process owners institute corrective actions within their respective domains to bolster control mechanisms. Noteworthy audit observations, along with ensuing corrective measures, are presented before the Audit Committee of the Board. The Internal Audit function is an ongoing process, continually assessing various Company processes and proposing value-enhancing enhancements to further fortify these systems and augment their efficacy.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Our emphasis remains steadfastly on recruiting the right individuals for the right roles, cultivating their capabilities, managing performance, and fostering active engagement. These concerted efforts are projected to heighten cost competitiveness through increased levels of employee participation, commitment, and involvement.

The trajectory of our industrial relations continues to be characterized by cordiality and mutual respect. The culture of coaching and mentoring is a continuous thread at Solex, aimed at identifying talent across the organization and nurturing future leaders. Existing employees are provided opportunities for growth within the system. A holistic approach to functional training, complemented by cultural events, sustains team engagement and motivation. In line with our commitment to social responsibility, the companys workforce consisted of 368 employees as of March 31, 2023, with a significant majority being youth hailing from tribal areas.

DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE FINANCIAL PERFORMANCE

Particulars	Current Year 2022-23	Previous Year 2021-22
Total Income	16438.83	7229.36
Profit before Interest and Depreciation	1399.88	222.99
Less: Interest	561.22	75.07
Profit Before Depreciation	838.66	147.92
Less: Depreciation	453.49	25.16
Profit Before Tax	385.17	122.76
Less/Add: Tax Expenses
Taxes for Earlier Years	1.89	(6.20)
Current Tax	66.09	33.02
Deferred Tax	46.11	(2.85)
Total Tax Expenses	114.09	23.97
Profit for the year	271.07	98.79

The performance analysis for the year; we achieved a Net Revenue of Rs.16438.83 lakh and Net Profit of Rs. 271.07 lakh during the year. The Interest & Finance Costs for the year stood at Rs.561.22 lakh.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOF, INCLUDING

Particulars	Current Year 2022-23	Previous Year 2021-22	% Variance	Reason for change of 25% or more
Trade Receivable Turnover Ratio	6.34	1.88	236.94%	Due to Substantial Increase in the Operational Sales of the Company during the year, compared to Previous Year, but however the Pending Trade Receivable was maintained at the same level as that of Previous Year, this Ratio has Increased Substantially.
Inventory Turnover Ratio	6.15	5.90	4.32%	Due to Substantial Increase in the Operations of the Company during the year, but however the Inventory holding was maintained at the same level as that of Preceding Year, this Ratio has Increased Substantially
Interest Service Coverage Ratio	1.69	2.64	-36.01%	Due to Substantial Decrease in the interest cost on Borrowings by the Company during the year, this Ratio has decreased Substantially.
Current Ratio	1.53	2.34	-34.57%	Due to Substantial Increase in the short term borrowing and debtors & Creditors during the year, as compared to the Preceding Year, this Ratio has decreased Substantially.
Debt Equity Ratio	1.75	0.55	216.12%	Due to Substantial Increase in the Long-Term Borrowings by the Company during the year, the Equity of the Company has Substantially Increased, this Ratio has increased Substantially.
Operating Profit Margin (%)	0.73	1.19	-38.73%	Due to Substantial Increase in the other income (Subsidy - Received) by the Company during the year. this Ratio has decreased Substantially.
Net Profit Margin (%)	1.68	1.37	22.04%	Due to Substantial Increase in Operational Sales, and due to this there was overall Increase in Net Profit of the Company, and hence this Ratio was Substantially Increased as compared to Previous Year.
Return on Net Worth	0.78	0.66	18.61%	Due to Substantial Increase in the Net Profit earned by the Company during the year, increased the reserve and surplus of the Company Substantially, during the year, as compared to the Preceding Year and hence the Ratio has increased as compared to Previous Year.

DISCLOSURE OF ACCOUNTING TREATMENT

The Company is responsible for the preparation and presentation of the financial statements that gives a true and fair view of the net profit of the financial position, financial performance and cash flows of the Company in accordance with the applicable accounting standards prescribed under Section 133 of the Act read with relevant rules issued thereunder and other accounting principles generally accepted in India.

CAUTIONARY STATEMENT

Statement in this management analysis detailing the Companys objectives, projections, estimates, expectations, or predictions may be "forward looking" statements within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that may influence your Companys operations include Global and domestic supply and demand conditions affecting selling prices, input availability and prices, changes in Government policies, regulations, tax regimes, economic development within and outside the country and other allied factors. The Company assumes no responsibility to publicly amend, modify or revise the forward-looking statement on the basis of subsequent developments, information or events.