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Standard Glass Lining Technology Ltd Management Discussions

151.48
(3.17%)
Apr 1, 2025|12:00:00 AM

Standard Glass Lining Technology Ltd Share Price Management Discussions

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the Financial Years ended March 31, 2024, March 31, 2023 and March 31, 2022. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our Restated Financial Consolidated Information and the sections entitled "Summary of Financial Information" and "Financial Statements" on pages 86 and 236, respectively. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled "Risk

Factors" on page 42. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer to the section entitled "Forward-Looking Statements" on page 22. Unless otherwise stated or unless the context otherwise requires, the financial information of our Company used in this section has been derived from the Restated Consolidated Financial Information. Unless noted otherwise, some of the industry related information in this section is obtained or extracted from the F&S Report (which is a paid report and was commissioned by us solely in connection with the Offer), which is available on the website of our Company at https://www.standardglr.com/investors#f-s-industry-report.

Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.

Overview

We are one of the top five specialised engineering equipment manufacturer for pharmaceutical and chemical sectors in India, in terms of revenue in Fiscal 2024 (Source: F&S Report), with in house capabilities across the entire value chain. Our capabilities include designing, engineering, manufacturing, assembly, installation and commissioning solutions as well as establishing standard operating procedures for pharmaceutical and chemical manufacturers on a turnkey basis. Our portfolio comprises core equipments used in the manufacturing of pharmaceutical and chemical products, which can be categorized into: (i) Reaction Systems; (ii) Storage, Separation and Drying Systems; and (iii) Plant, Engineering and Services (including other ancillary parts). We are also one of Indias top three manufacturers of glass-lined, stainless steel, and nickel alloy based specialised engineering equipment, in terms of revenue in Fiscal 2024 (Source: F&S Report). We are also one of the top three suppliers of polytetrafluoroethylene ("PTFE") lined pipelines and fittings in India, in terms of revenue in Fiscal 2024 (Source: F&S Report). We have been the fastest-growing company in the industry in which we operate during the past three completed Fiscals in terms of revenue (Source: F&S Report).

We possess in-house capabilities to manufacture all the core specialised engineering equipment required in the active pharmaceutical ingredient ("API") and fine chemical products manufacturing process (Source: F&S Report). Over the last decade we have supplied over 11,000 products. The below graphic illustrates our presence across the core functions of API or fine chemical product manufacturing process:

Our engineered solutions are used in processes across pharmaceutical, chemical, food and beverage, biotechnology and fertilizer sectors. We customise our products basis the unique process requirements of our customers. We also provide turnkey automated equipment solutions, optimising processes like vacuum distillation, solvent recovery and gas dispersion.

We have a diversified customer base including end users operating in a range of sectors across pharmaceutical, chemicals, paint, bio technology and food and beverages. Our marquee customer base includes 30 out of approximately 80 pharmaceutical and chemical companies in the NSE 500 index as of June 30, 2024 (Source: F&S Report). Some of our customers include Apitoria Pharma Private Limited, Aurobindo Pharma Limited, CCL Food and Beverages Private Limited, Cohance Lifesciences Limited, Cadila Pharmaceutical Limited, Deccan Fine Chemicals (India) Private Limited, Dasami Lab Private Limited, Laurus Labs Limited, Granules India Limited, Macleods Pharmaceuticals Limited, MSN Laboratories Private Limited, Natco Pharma Limited, Honour Lab Limited, Hetero Drugs Limited, Hetero Labs Limited, Hazelo Lab Private Limited, Piramal Pharma Limited, Sanvira Biosciences Private Limited, Suven Pharmaceuticals Limited, Tagros Chemicals India Private Limited, Vamsi Labs Limited and Viyash Life Sciences Private Limited.

The following table sets forth our revenues by end user industries for Fiscal 2024, Fiscal 2023 and Fiscal 2022, respectively.

Particulars Fiscal 2024 Fiscal 2023 Fiscal 2022
Amount ( in million) % of total revenue from operations Amount ( in million) % of total revenue from operations Amount ( in million) % of total revenue from operations
Pharmaceuticals 4,446.70 81.79% 4,119.79 82.80% 2,054.33 85.53%
Chemicals 681.72 12.54% 713.37 14.34% 324.48 13.51%
Others* 308.27 5.67% 142.72 2.86% 23.06 0.96%
Total 5,436.69 100.00% 4,975.88 100.00% 2,401.87 100.00%

*Others includes: (i) paint; (ii) bio technology; (iii) food and beverages and (iv) other industries

We operate through our eight manufacturing facilities spread across built-up/floor area of over 400,000 sq. ft., strategically located in Hyderabad, Telangana, the "Pharma Hub" of India, which accounted for 40.00% of the total Indian bulk drug production in Fiscal 2024 (Source: F&S Report). Our manufacturing capabilities are complemented by a sales ,service and distribution network operating from four sales offices located in Vadodara, Gujarat, Ankleshwar, Gujarat, Mumbai, Maharashtra and Vishakhapatnam, Andhra Pradesh and sales team members in Jhagadia, Gujarat, Chennai, Tamil Nadu, New Delhi, Bengaluru, Karnataka and Vijayawada, Andhra Pradesh with pan-India reach. We also have agency arrangements for sale and marketing of our products in Bangladesh as well as agency and distribution agreement for sale, marketing and distribution of our products in Russia. Further, we have resale arrangements for North America (excluding Cuba), South America, Europe (excluding Belarus and Russia) and certain countries in Asia and Africa.

Our growth has been compounded by our partnerships. We have entered into an agreement with HHV Pumps

Private Limited ("HHV"), for supply of vacuum pumps along with a private label arrangement. We also have a supply and purchase arrangement for India with Japan based Asahi Glassplant Inc. and GL Hakko Co. Ltd ("GL Hakko") for procurement of specified grades of glass for our glass lining division. These partnerships have enabled us to fortify our position in the Glass Lining and Vacuum Pumps market in India (Source: F&S Report).

Our revenues from our various lines of business were as follows:

Particulars Fiscal 2024 Fiscal 2023 Fiscal 2022
Amount ( in million) % of total revenue from operatio ns Amount ( in million) % of total revenue from operatio ns Amount ( in million) % of total revenue from operatio ns
Reaction Systems 3,083.79 56.71% 3,047.86 61.25% 1,638.78 68.23%
Storage, Separation and Drying
Systems 1,635.49 30.08% 1,540.98 30.97% 626.22 26.07%
Plant, Engineering and Services 718.11 13.21% 387.04 7.78% 136.87 5.70%
Total 5,436.69 100.00% 4,975.88 100.00% 2,401.87 100.00%

Note:

1. Reaction Systems include: (i) heat transfer systems; (ii) pipes and fittings; (iii) pumps; and (iv) reactors. 2. Storage, Separation and Drying Systems include: (i) Filtration and Drying; (ii) storage and (iii) vessels. 3. Plant, Engineering and Services include: (i) services; (ii) utility systems; and (iii) others

We also benefit from an experienced management team, which is supported by a capable and motivated pool of employees. Our senior management team has diverse experience in manufacturing and functions related to our business, and an in-depth understanding of the specific industry, products and geographic regions they cover, which enables them to appropriately support and guide our employees. Our management team is guided by our seasoned Board, who have extensive experience in the pharmaceutical, chemicals and engineering sectors.

Financial and operational metrics

The following table sets forth certain key financial information relating to our business for the periods indicated:

(in million, unless otherwise stated)

Particulars Fiscal 2024 Fiscal 2023 Fiscal 2022
Revenue from Operations ( in millions) 5,436.69 4,975.88 2,401.87
YoY Growth Rate (%)

9.26%

107.17%

-

2Y CAGR (%)

50.45%

-

-

EBITDA(1) ( in millions) 1,009.19 882.56 417.79
EBITDA Margin (%)(2) 18.36% 17.65% 17.30%
PAT(3) ( in millions) 600.11 534.24 251.45
YoY Growth Rate (%)

12.33%

112.46%

-

PAT Margin (%)(4) 10.92% 10.68% 10.41%
ROCE(%)(5) 25.49% 43.43% 42.03%
ROE (%)(6) 20.74% 47.56% 54.89%
RoA (%)(7) 11.85% 16.54% 13.23%
Total Debt to Equity (8) 0.32 0.53 1.01
Net Debt to Equity (9) 0.19 0.49 1.01
Net Fixed Asset Turnover Ratio (10) 6.08 7.60 6.26
Adjusted ROCE (%) (11) 29.70% 43.86% 42.03%

Notes:

(1) EBITDA is calculated as profit before tax expenses plus finance costs and depreciation and amortization expense and impairment of property, plant and equipment for the year/period. (2) EBITDA Margin has been calculated. as EBITDA divided by Total Income (3) PAT refers to Restated Profit for the year (4) PAT margin refers to PAT divided by Total Income (5) ROCE calculated as Profit before tax add finance cost divided by Average Capital employed. Capital employed refers to Total Equity plus total borrowings and lease liabilities (long term and short term) excluding cash and cash equivalents and Bank balances other than cash and cash equivalents (6) Return on Equity has been calculated as net income (owners share) divided by Average Net Worth Net Worth = Aggregate value of equity share capital (excluding non- controlling interest) and other equity created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses but does not include reserves created out of revaluation of assets and write-back of depreciation. (7) RoA is calculated as PAT divided by Average Total Assets (8) Debt to equity ratio has been calculated as total borrowings and lease liabilities (including current maturities of long-term debt and lease liabilities) divided by Net Worth (excluding non-controlling interest) (9) Net debt/ Equity refers to Total borrowings and lease liabilities including current maturities of long-term debt and lease liabilities) less cash and cash equivalents and Bank balances other than cash and cash equivalents divided by Net Worth (excluding non-controlling interest) (10) Net Fixed asset turnover ratio calculated as Revenue from Operations/ Average Net Fixed Assets. Net Fixed assets includes Property, plant and equipment, Capital work-in-progress, Other intangible assets, goodwill, right of use assets and Intangible assets under development. Adjusted ROCE calculated as Profit before tax add finance cost divided by Average Capital employed. Capital employed refers to Total Equity plus total borrowings and lease liabilities (long term and short term) excluding cash and cash equivalents and Bank balances other than cash and cash equivalents and Fixed Deposits excluding Margin Money.

Significant Factors Affecting Our Results of Operations

Our results of operations have been, and will be, affected by many factors, some of which are beyond our control. The following is a discussion of certain factors that have had, and will continue to have, a significant effect on our financial condition and results of operations:

Macroeconomic trends that affect the pharmaceuticals and chemicals sectors

Our growth and results of operations and financial condition are significantly affected by end-customer demand for products manufactured or sold or services provided by our end-customers, which in turn is linked to macro factors driving demand for chemical and pharmaceutical sectors in India and globally. These factors include health concerns, pandemics, regulatory oversight, levels of per capita disposable income, levels of consumer spending, consumer preferences, business investment, changes in interest rates, fuel and power prices, government policies or taxation, social or civil unrest and political, economic or other developments that affect consumption and business activities in general. In each of the last three Fiscals, more than 94.33% of our revenue from operations were derived from the pharmaceutical and chemical sectors. As per the F&S Report, capital spending in the pharmaceuticals sector is likely to remain at the current level or perhaps increase to between 120 billion and 150 billion per year till Fiscal 2027, owing to local and export demand from semi-regulated markets. Furthermore, the governments Production Linked Incentives (PLI) policy, which envisions India as the worlds pharmacy, would provide additional support.

Furthermore, F&S expects demand for chemicals manufactured in India in the worldwide market to grow in the coming years, as key markets move their demand away from China to avoid potential disruptions. This in turn will incentivize industry players to increase their capacity to meet future demand. As a result, F&S predicts that the players capex will increase by 7% to 9% CAGR until FY2025-26, to reach INR 70 Bn per year in FY2025-26. This predicted rise in expenditure is on account of robust demand potential from overseas markets owing to China plus one trend, as well as government backing to ramp up capacity through PLI scheme. (Source: F&S Report)

Our performance may decline during recessionary periods or in other periods where one or more macro-economic factors, or potential macro-economic factors, negatively affect the level of consumer and business confidence and consumption or the performance of our end-customers.

Raw materials cost and availability

Our Cost of Goods Sold, which is the aggregate of our costs of materials consumed and changes in inventories of finished goods and work in progress, make up the largest portion of our operating expenses. For Fiscal 2024, Fiscal 2023 and Fiscal 2022, our Cost of Goods Sold amounted to 3,176.67 million, 2,854.91 million and 1,151.45 million, respectively, which represented 57.79%, 57.09% and 47.68% of our total income, respectively. Our financial condition and results of operations are significantly impacted by the availability and cost of our major raw materials, particularly stainless steel, carbon/ mild steel, nickel alloy, forgings, castings, chemicals and PTFE powder. Additionally, we also rely on certain bought out components such as motor, gear box, mechanical seals, etc.

We primarily source our key raw materials used in the manufacturing process from third-party suppliers in India and globally. The prices of our raw materials are based on, or linked to, the global pricing of such raw materials and the variations in pricing cannot be passed on to our customers, except when there is a change in the scope of the original order. While we are not significantly dependent on any single raw material supplier, we depend on our top 10 suppliers of raw material and therefore supply and pricing can be volatile due to a number of factors beyond our control, including global demand and supply, general economic and political conditions, transportation and labour costs, labour unrest, natural disasters, competition, import duties, tariffs and currency exchange rates, and there are inherent uncertainties in estimating such variables, regardless of the methodologies and assumptions that we may use. We cannot assure you that we will be able to procure adequate supplies of raw materials in the future, as and when we need them on commercially acceptable terms. Please also see "Risk Factors- 14. We do not have long term or exclusive contracts with majority of our customers and suppliers. If such customers choose not to source their requirements from us and or if such suppliers choose not to provide us with the requisite raw materials, there may be a material adverse effect on our business, financial condition, cash flows and results of operations." on page 50.

Volatility in commodity prices can significantly affect our raw material costs. We usually do not enter into long-term supply contracts with our raw material suppliers, and typically source raw materials on a periodic purchase orders basis. The absence of long-term supply contracts at fixed prices exposes us to volatility in the prices of raw materials that we require. While we endeavour to account for raw material price increases at the time of providing estimates to our customers, we may not be able to compensate for or pass on our increased costs to our customers in all cases. If we are not able to compensate for increased raw materials costs, such price increases could have a material adverse impact on our result of operations, financial condition and cash flows.

We face the risk that suppliers may be unable to provide raw materials in the quantities we ordered or at all or that the market price of raw materials may increase without warning. Where certain raw materials may not be available at all or at commercially acceptable prices, we may be unable to manufacture the products in which such raw materials are components at all until such raw materials become available again. Increases in prices of raw materials, or the unavailability thereof, could have a material adverse effect on our business, financial condition and results of operations.

Dependence upon a limited number of customers and suppliers

We are dependent on certain key customers for a significant portion of our revenue and the loss of any one or more of such key customers for any reason (including due to loss of contracts or failure to negotiate acceptable terms during contract renewal negotiations, disputes with customers, adverse change in the financial condition of such customers, including due to possible bankruptcy or liquidation or other financial hardship, merger or decline in their sales, reduced or delayed customer requirements for our products, plant shutdowns, labour strikes or other work stoppages) could have an adverse effect on our business, results of operations and financial condition. For further details, please see "Risk Factors- Our revenue from operations is dependent upon a limited number of customers and the loss of any of these customers or loss of revenue from any of these customers could have a material adverse effect on our business, financial condition, results of operations and cash flows." on page 44.

For certain of our key raw materials, we are dependent on a limited number of suppliers. The loss of one or more of these suppliers could adversely impact our manufacturing processes and supply timelines, in turn adversely impacting our ability to comply with delivery schedules agreed with clients resulting in impact on our financial condition and results of operations. For further details, please see "Risk Factors- We are dependent on a limited number of suppliers for our key raw materials such as stainless steel, carbon/ mild steel, nickel alloy, forgings, castings, chemicals and polytetrafluoroethylene powder. The loss of one or more of these suppliers could adversely impact our manufacturing processes and supply timelines, in turn adversely impacting our ability to comply with delivery schedules agreed with clients resulting in impact on our financial condition and results of operations." on page 45.

Capital expenditure

We require substantial capital to construct new manufacturing facilities, maintain our existing facilities, and expand and modernize our existing manufacturing facilities. As of date, we have eight manufacturing facilities in India, located in Hyderabad, Telangana.

In Fiscal 2024, Fiscal 2023 and Fiscal 2022, we incurred capital expenditure of 372.50 million, 300.76 million and 118.94million, respectively. A significant amount of our capital expenditure has been and is expected to continue to be aimed at increasing our manufacturing capacities, upgrading our facilities and diversifying our product lines. In order to augment our existing capacities, we will require additional machinery and equipment. For further details, please see "Risk Factors- We intend to utilize a portion of the Net Proceeds for funding our capital expenditure requirements in relation to the expansion of our manufacturing capacities which may be subject to the risk of unanticipated delays in implementation, cost overruns and other risks and uncertainties." on page 62.

The actual amount and timing of our future capital requirements may differ from estimates as a result of, among other things, unforeseen delays or cost overruns in developing our products, changes in business plans due to prevailing economic conditions, unanticipated expenses and regulatory changes. To the extent our planned expenditure requirements exceed our available resources, we will be required to seek additional debt or equity financing. Additional debt financing could increase our interest costs and require us to comply with additional restrictive covenants in our financing agreements. Additional equity financing could dilute our earnings per Equity Share and your interest in the Company and could adversely impact our Equity Share price.

Operating costs and efficiencies

As we continue to expand the size and scope of our business, optimizing our operating costs and enhancing operating efficiencies will be critical to maintaining our competitiveness and profitability, particularly in view of the competitive environment in which we operate. Our employee benefit expenses have increased as a percentage of our revenue from operations, mainly due to an expansion of our workforce. In Fiscal 2024, Fiscal 2023 and Fiscal 2022, our employee benefit expenses accounted for 3.82%, 3.17% and 5.63% of our revenue from operations, respectively. Employee costs are semi-fixed in nature. We believe that, with the expected expansion in operations going forward, our employee and other operating costs as a percentage to overall revenue will be under control. Accordingly, our profitability is partially dependent on our ability to spread such costs over higher sales volumes.

Competition

Our competition varies by market, geographic areas and type of product. We face competition in India from organized and unorganized manufacturers and from international manufacturers. Our leadership position in our key products offers us advantages, such as cost efficiency due to economies of scale, competitive product pricing, ability to scale our business and the ability to strategically expand into new product lines. Despite such advantages, to remain competitive in our markets, we must continuously strive to strengthen our brand, reduce our costs of production, transportation and distribution and improve our operating efficiencies. We compete primarily on the basis of product quality, price, product delivery and service. Some of our competitors may be able to produce products at competitive costs and, consequently, supply their products at cheaper prices. Such competitors may also have greater financial and technological resources and may also have larger sales and marketing teams. They might be in a better position to identify market trends, adapt to changes in industry, innovate new products and offer competitive prices due to economies of scale. We are unable to assure you that we will be able to continue to charge pricing at commercially acceptable levels. Any inability to do so will adversely affect our financial condition and results of operation. Any inability on our part to remain competitive in our markets will adversely affect our financial condition and results of operation. For further details, see "Business Competition" on page

262 and "Risk Factors - Our success depends on our ability to understand evolving industry trends and to fulfill the changing preferences of our customers. Further, the cost of implementation of new technologies could be significant." on page 49.

Government regulations, policies and initiatives

We are subject to national, regional and state laws and government regulations in India, including regulations related to manufacturing facilities, safety, health, labour, environmental protection and hazardous waste management. These laws and regulations impose controls on air and water discharge, noise levels, storage handling, employee exposure to hazardous substances and other aspects of our manufacturing operations. We incur significant costs to comply with all such laws and regulations. We are unable to assure you that such laws or regulations will not change in the future or that no new compliance requirements will be imposed on our operations. Any such changes could increase our operational costs, which could have a material and adverse effect on our financial condition and results of operations.

We import a portion of our raw materials for our manufacturing operations. For each of Fiscal 2024, Fiscal 2023 and Fiscal 2022, we imported 2.79%, 3.25% and 0.94% of our total raw materials. Further, we are dependent on certain foreign suppliers for imports of nickel alloy, which accounted for 2.28%, 2.65% and 0.65% of our total cost of raw materials in each of Fiscal 2024, Fiscal 2023 and Fiscal 2022. Therefore, government regulations and policies, of India and of the countries from which we import supplies, can affect the price and availability of our raw materials, as well as the demand for our products. These regulations and policies are extensive and cover a broad range of industries to which we cater, some of which are politically sensitive. These regulations and policies and the tax regimes to which we are subject could change at any time, with little or no warning or time for us to prepare. If, in the future, any trade restrictions, sanctions or higher tariffs are imposed by India on imports from another country or similar restrictions, sanctions or higher tariffs are placed by the exporting country for supply of products to India, such restrictions, sanctions or higher tariffs may significantly impact our sourcing decisions and it may lead to increased cost of purchase, and shortages of materials, which could impact our supply commitment to our customers and adversely affect our manufacturing activities.

For further details, see "Risk Factors Changes in trade policies and regulations may adversely affect our operations and future profitability, especially on account of restrictions in import of our key raw materials." on page 59 and " Key Regulations and Policies in India" on page 267.

Our Critical Accounting Policies

The significant accounting policies followed by us in the preparation of our Restated Financial Information are set out below.

A. Revenue recognition

Revenue from contracts with customers

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services.

Revenue is measured at transaction price (net of variable consideration, if any). The transaction price is the consideration received or receivable and is reduced by rebates, allowances and taxes and duties collected on behalf of the government.

Sale of products

Revenue from sale of products is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery of the equipment.

Sale of services

Revenue from sale of services is recognised in accordance with the terms of the relevant agreement entered with customers and revenue is recognised at a point in time as and when the related services are rendered.

B. Government grants

Government grants are recognised where there is reasonable assurance that the grant will be received, and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed.

When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

C. Foreign currency transactions and balances

Transactions in foreign currencies are initially recorded by the Group at functional currency spot rates at the date the transaction first qualifies for recognition.

Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Exchange differences arising on settlement or translation of monetary items are recognised in profit or loss.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions.

D. Borrowing costs

Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the asset. All other borrowing costs are expensed in the period in which they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

E. Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus or minus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price. Trade receivables issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

Classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at:

- Amortised cost;

- FVOCI;

- FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

- it is held within a business model whose objective is to hold assets to collect contractual cash flows; and - its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate ("EIR") method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in other income in the Statement of profit or loss. The losses arising from impairment are recognised in the profit or loss.

The Group recognises an allowance for expected credit losses ("ECLs") for all debt instruments not held at fair value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are integral to the contractual terms.

For trade receivables, the Group applies a simplified approach in calculating ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

Financial liabilities

Classification, subsequent measurement and gains and losses

Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability classified as at FVTPL if it is classified as held-for-trading, it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses, including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit and loss.

Offsetting of financial instruments

Financial assets and liabilities are offset and the net amount is reported in the balance sheet if there is a currently legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.

F. Property, plant and equipment

Recognition and measurement

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses, if any.

Subsequent costs are included in the assets carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to the statement of profit and loss during the year in which they are incurred.

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress.

Depreciation

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:

Category of asset Useful lives estimated by the management
Factory sheds 30
Plant and machinery 15
Electrical equipment 10
Computers 3
Office equipments 5
Furniture and Fixtures 10
Motor cars and cycles 8 to 10 years

Leasehold improvements are depreciated over the remaining period of the lease or estimated useful life of the assets, whichever is lower.

Depreciation method, useful lives and residual values are reviewed at each period end and adjusted if appropriate.

G. Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets (Computer software) are amortised over the useful economic life of 6 to 10 years on straight line basis and assessed for impairment whenever there is an indication that the intangible asset may be impaired.

The amortisation period and the amortisation method for an intangible asset are reviewed at least at the end of each reporting period.

H. Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition are accounted for as follows:

Raw materials, stores and spares: Cost includes cost of purchase and other costs incurred in bringing the inventories to their present location and condition. Cost is determined on weighted average method.

Finished goods and work in progress: Cost includes cost of direct materials and labour and a proportion of manufacturing overheads based on the normal operating capacity but excluding borrowing costs. Cost is determined on weighted average method.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Provision for inventories

Provision of obsolescence on inventories is considered on the basis of managements estimate based on demand and market of the inventories.

I. Impairment of non-financial assets

The Group non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the assets recoverable amount is estimated.

For impairment testing, assets that do not generate independent cash inflows are grouped together into cash-generating units ("CGUs"). Each CGU represents the smallest group of assets that generates cash inflows that are largely independent of the cash inflows of other assets or CGUs.

The recoverable amount of a CGU (or an individual asset) is the higher of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the CGU (or the asset).

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of profit and loss.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Groups CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year. To estimate cash flow projections beyond periods covered by the most recent budgets/forecasts, the Group extrapolates cash flow projections in the budget using a steady or declining growth rate for subsequent years, unless an increasing rate can be justified. In any case, this growth rate does not exceed the long-term average growth rate for the products, industries, or country in which the entity operates, or for the market in which the asset is used.

J. Employee benefits

Short-term obligations

Liabilities for wages and salaries, including non-monetary benefits that are expected to be settled wholly within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees services up to the end of the reporting period and are measured on an undiscounted basis at the amounts expected to be paid when the liabilities are settled. The liabilities are presented as current employee benefit obligations in the balance sheet.

Defined contribution plans

The Groups contributions to defined contribution plans are charged to the statement of profit and loss as and when the services are received from the employees.

Defined benefit plans

The liability in respect of defined benefit plans and other post-employment benefits is calculated using the projected unit credit method consistent with the advice of qualified actuaries. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related defined benefit obligation. In countries where there is no deep market in such bonds, the market interest rates on government bonds are used. The current service cost of the defined benefit plan, recognised in the statement of profit and loss in employee benefit expense, reflects the increase in the defined benefit obligation resulting from employee service in the current year, benefit changes, curtailments and settlements. Past service costs are recognised immediately in the statement of profit and loss.

The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and the fair value of plan assets. This cost is included in employee benefit expense in the statement of profit and loss. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions for defined benefit obligation and plan assets are recognised in OCI in the period in which they arise. When the benefits under a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service or the gain or loss on curtailment is recognised immediately in the statement of profit and loss. The Group recognises gains or losses on the settlement of a defined benefit plan obligation when the settlement occurs.

Compensated absences

The Groups current policies permit certain categories of its employees to accumulate and carry forward a portion of their unutilised compensated absences and utilise them in future periods or receive cash in lieu there of in accordance with the terms of such policies. The Group measures the expected cost of accumulating compensated absences as the additional amount that the Group incurs as a result of the unused entitlement that has accumulated at the reporting date. Such measurement is based on actuarial valuation as at the reporting date carried out by a qualified actuary. The Group presents the compensated absences as a current liability in the balance sheet as it does not have an unconditional right to defer its utilisation for 12 months after the reporting date.

K. Leases

The Group assesses at contract inception whether a contract is or contains a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets. The right-of-use assets are also subject to impairment.

Lease liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occurs.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset.

Short-term leases and leases of low-value assets

The Group applies the short-term lease recognition exemption to its short-term leases (i.e., those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term.

L. Income-tax

Income-tax comprises current and deferred tax. It is recognised in profit or loss except to the extent that it relates to an item recognised directly in equity or in other comprehensive income.

Current tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date. Current income tax relating to items recognised outside the statement of profit and loss is recognised outside the statement of profit and loss (either in OCI or in equity in correlation to the underlying transaction). Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions, where appropriate.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Deferred tax is not recognised for:

- temporary differences arising on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss at the time of the transaction; and - temporary differences related to investments in subsidiaries to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future;

Deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which they can be used. The existence of unused tax losses is strong evidence that future taxable profit may not be available. Therefore, in case of a history of recent losses, the Group recognises a deferred tax asset only to the extent that it has sufficient taxable temporary differences or there is convincing other evidence that sufficient taxable profit will be available against which such deferred tax asset can be realised. Deferred tax assets unrecognised or recognised, are reviewed at each reporting date and are recognised/ reduced to the extent that it is probable/ no longer probable respectively that the related tax benefit will be realised.

Deferred tax is measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the laws that have been enacted or substantively enacted by the reporting date.

The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

M. Provisions

General

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit and loss net of any reimbursement.

Warranty provisions

The Group provides warranties for general repairs of defects that existed at the time of sale, as required by law. Provisions related to these assurance-type warranties are recognised when the product is sold, or the service is provided to the customer. Initial recognition is based on historical experience. The initial estimate of warranty-related costs is revised annually.

N. Earnings per share

Basic earnings per share is calculated by dividing the net profit or loss for the year attributable to equity shareholders (after deducting preference dividends and attributable taxes) by the weighted average number of equity shares outstanding during the year.

The weighted average number of equity shares outstanding during the year is adjusted for events such as bonus issue, bonus element in a rights issue, share split, and reverse share split (consolidation of shares) that have changed the number of equity shares outstanding, without a corresponding change in resources.

For the purpose of calculating diluted earnings per share, the net profit or loss for the year attributable to equity shareholders and the weighted average number of shares outstanding during the year are adjusted for the effects of all dilutive potential equity shares.

O. Cash and cash equivalents

Cash and cash equivalent in the balance sheet comprise cash at banks and on hand and short-term deposits with an original maturity of three months or less, that are readily convertible to a known amount of cash and subject to an insignificant risk of changes in value.

P. Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the Group), whose operating results are regularly reviewed by the Groups chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available. Operating segments of the Group are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.

Q. Business combinations - Common control transactions

Business combinations involving entities that are controlled by the Group are accounted for using the pooling of interest method as follows:

(i) The assets and liabilities of the combining entities are reflected at their carrying amounts.

(ii) No adjustments are made to reflect fair values, or recognise any new assets or liabilities. Adjustments are only made to harmonise accounting policies. (iii) The financial information in the financial statements in respect of prior periods is restated as if the business combination had occurred from the beginning of the preceding period in the financial statements, irrespective of the actual date of the combination. However, where the business combination had occurred after that date, the prior period information is restated only from that date. (iv) The balance of the retained earnings appearing in the financial statements of the transferor is aggregated with the corresponding balance appearing in the financial statements of the transferee or is adjusted against general reserve. (v) The identity of the reserves are preserved and the reserves of the transferor become the reserves of the transferee. (vi) The difference, if any, between the amounts recorded as share capital issued plus any additional consideration in the form of cash or other assets and the amount of share capital of the transferor is transferred to capital reserve and is presented separately from other capital reserves.

Key Performance Indicators and Non-GAAP Financial Measures

In addition to our results determined in accordance with Ind AS, we believe the following non-GAAP measures are useful to our Company and our investors as a means of assessing and evaluating our performance in comparison to prior periods. We use the following non-GAAP financial information to evaluate our ongoing operations and for internal planning and forecasting purposes: CAGR, EBITDA, EBITDA Margin, PAT Margin, Return on Capital Employed, Return on Equity, Return on Assets, Net Debt to Equity Ratio, Adjusted Return on Capital Employed, Net Worth, Return on Net Worth and Net Asset Value per Equity Share. We believe that non-GAAP financial information, when taken collectively with financial measures prepared in accordance with Ind AS, may be helpful to investors because it provides an additional tool for investors to use in evaluating our ongoing operating results and trends and in comparing our financial results with other companies in our industry because it provides consistency and comparability with past financial performance. However, our management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with Ind AS.

Non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with Ind AS. Non-GAAP financial information are not recognized under Ind AS and do not have standardized meanings prescribed by IND AS. In addition, non-GAAP financial measures used by us may differ from similarly titled non-GAAP measures used by other companies. The principal limitation of these non-GAAP financial measures is that they exclude significant expenses and income that are required by Ind AS to be recorded in our financial statements, as further detailed below. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure prepared in accordance with Ind AS. Investors are encouraged to review the related Ind AS financial measures and the reconciliation of non-GAAP financial measures to their most directly comparable Ind AS financial measures included below and to not rely on any single financial measure to evaluate our business.

Particulars Fiscal 2022 Fiscal 2023 Fiscal 2024
Revenue from Operations ( in millions) 2,401.87 4,975.88 5,436.69
YoY Growth Rate (%)

-

107.17%

9.26%

2Y CAGR (%)

-

-

50.45%

EBITDA(1) ( in millions) 417.79 882.56 1,009.19
EBITDA Margin (%)(2) 17.30% 17.65% 18.36%
PAT(3) ( in millions) 251.45 534.24 600.11
YoY Growth Rate (%)

-

112.46%

12.33%

PAT Margin (%)(4) 10.41% 10.68% 10.92%
ROCE(%)(5) 42.03% 43.43% 25.49%
ROE (%)(6) 54.89% 47.56% 20.74%
RoA (%)(7) 13.23% 16.54% 11.85%
Total Debt to Equity (8) 1.01 0.53 0.32
Net Debt to Equity (9) 1.01 0.49 0.19
Net Fixed Asset Turnover Ratio (10) 6.26 7.60 6.08
Adjusted ROCE (%) (11) 42.03% 43.86% 29.70%

As certified by Niranjan & Narayan, Chartered Accountants through their certificate dated July 24, 2024. Notes:

(1) EBITDA is calculated as profit before tax expenses plus finance costs and depreciation and amortization expense and impairment of property, plant and equipment for the year/period. (2) EBITDA Margin has been calculated. as EBITDA divided by Total Income (3) PAT refers to Restated Profit for the year (4) PAT margin refers to PAT divided by Total Income (5) ROCE calculated as Profit before tax add finance cost divided by Average Capital employed. Capital employed refers to Total Equity plus total borrowings and lease liabilities (long term and short term) excluding cash and cash equivalents and Bank balances other than cash and cash equivalents (6) Return on Equity has been calculated as net income (owners share) divided by Average Net Worth Net Worth = Aggregate value of equity share capital (excluding non- controlling interest) and other equity created out of the profits, securities premium account and debit or credit balance of profit and loss account, after deducting the aggregate value of the accumulated losses but does not include reserves created out of revaluation of assets and write-back of depreciation. (7) RoA is calculated as PAT divided by Average Total Assets (8) Debt to equity ratio has been calculated as total borrowings and lease liabilities (including current maturities of long-term debt and lease liabilities) divided by Net Worth (excluding non-controlling interest) (9) Net debt/ Equity refers to Total borrowings and lease liabilities including current maturities of long-term debt and lease liabilities) less cash and cash equivalents and Bank balances other than cash and cash equivalents divided by Net Worth (excluding non-controlling interest) (10) Net Fixed asset turnover ratio calculated as Revenue from Operations/ Average Net Fixed Assets. Net Fixed assets includes Property, plant and equipment, Capital work-in-progress, Other intangible assets, goodwill, right of use assets and Intangible assets under development (11) Adjusted ROCE calculated as Profit before tax add finance cost divided by Average Capital employed. Capital employed refers to Total Equity plus total borrowings and lease liabilities (long term and short term) excluding cash and cash equivalents and Bank balances other than cash and cash equivalents and Fixed Deposits excluding Margin Money.

Explanation for the KPI:

KPI Explanation
1 Revenue from operations Revenue from Operations is used by the management to track the revenue profile of the business and in turn helps assess the overall financial performance of the Company and size of the business.
2 Growth in revenue from operations (%) Growth in revenue from operations provides information regarding the growth of the business for the respective period.
3 EBITDA EBITDA provides information regarding the operational profitability of the business.
4 EBITDA Margin EBITDA margin is an indicator of the operational efficiency of the business in comparison to the revenue from operations.
5 Profit for the Year / Period Profit after tax provides information regarding the overall profitability of the business.
6 PAT Margin Tracking PAT margin assists in tracking the margin profile of the business of the Company and allows comparison of results over multiple periods.
7 ROE RoE provides how efficiently the Company generates profits from shareholders funds.
8 ROCE ROCE provides how efficiently the Company generates earnings from the capital employed in the business.
9 ROA Represents the ratio of return on average assets which is profit after tax (PAT) to average Total assets for the relevant fiscal year. It is used to assess the return on the total assets of the company.
10 Debt to Equity Ratio Debt to equity ratio is a metric that measures the degree to which the Company is financing its operation with debt compared to its own equity.
11 Net Debt to Equity Ratio Debt to equity ratio is a metric that measures the degree to which the Company is financing its operation with net debt compared to its own equity.
12 Fixed Asset Turnover This formula helps assess the Company how efficiently sales are being generated from existing fixed assets over multiple periods.
13 Adjusted ROCE Adjusted Return on Capital Employed provides how efficiently the Company generates earnings from the capital employed in the business excluding cash and cash equivalents and Bank balances other than cash and cash equivalents and Fixed Deposits excluding Margin Money.

EBITDA, EBITDA Margin, Net Worth, RoNW and NAV per Equity Share

The following table sets forth our EBITDA, EBITDA Margin, Net Worth, RoNW and NAV per Equity Share, including a reconciliation of (i) EBITDA and EBITDA Margin to our restated profits/losses before tax and prior period items, and (ii) Net Worth, RoNW and NAV to our restated profits/losses, in each of Fiscal 2024, Fiscal 2023 and Fiscal 2022. (in millions, except percentages)

For the fiscal year ended
Particulars 2024 March 31, 2023 2022
Total income (A) 5,496.81 5,000.76 2,415.02
Revenue from operations (B) 5,436.69 4,975.88 2,401.87
Profit before tax (C) 798.01 718.53 337.70
Add: Finance costs (D) 117.90 86.96 37.73
Add: Depreciation & amortization expense (E) 93.28 77.07 42.36
EBITDA (G=C+D+E) 1,009.19 882.56 417.79
EBITDA Margin (H=G/A) 18.36% 17.65% 17.30%
Profit for the year (I) 600.11 534.24 251.45
Equity (excluding non-controlling interest) (J) 4,073.40 1,557.20 689.59

(in millions, except percentages)

For the fiscal year ended March 31,
Particulars 2024 2023 2022
Profit after tax attributable to owners 583.84 534.24 251.45
Equity attributable to owners of the parent 4,073.40 1,557.20 689.59
Average Net Worth 2,815.30 1,123.40 458.08
Return on Net Worth(%) 20.74% 47.56% 54.89%
Net Asset Value
Net asset value (excluding Non Controlling Interest) 4,073.40 1,557.20 689.59
Weighted average number of equity shares outstanding at the end of the year adjusted for the issue of Bonus Equity Shares for all year, in accordance with principles of Ind AS 33 165.92 153.09 113.47
Net Asset Value per share 24.55 10.17 6.08
Net worth * 4,073.40 1,557.20 689.59

* Networth is Equity attributable to owners of the Parent/entity.

Principal Components of our Statement of Profit and Loss

The following descriptions set forth information with respect to the key components of our restated statement of profit and loss.

Our Income

Revenue from operations

Our revenue from operations primarily consists of (i) revenue from contracts with customers consisting (a) sale of products and (b) sale of services and (ii) other operating revenue consisting of scrap sales.

The following table sets out the break-up of revenue from contracts with customers and other operating revenues for the periods indicated:

Particulars Fiscal 2024 Fiscal 2023 Fiscal 2022
Revenue from contracts with customers
Sale of products 5,348.38 4,917.03 2,387.98
Sale of services 80.56 46.19 11.33
Other Operating revenue
Scrap sales 7.75 12.66 2.56
Total revenue from operations 5,436.69 4,975.88 2,401.87

The reconciliation of our revenue recognised with contract price

( in million)

Reconciliation of amount of revenue recognised with contract price Fiscal 2024 Fiscal 2023 Fiscal 2022
Revenue as per contracted price (including concession / subsidy on fertilisers) 5,454.06 4,988.46 2,427.47
Adjustments:
Sales returns (14.54) (7.60) (10.52)
Rebates (2.83) (2.80) (2.29)
Others - (2.18) (12.79)
Revenue from contracts with customers 5,436.69 4,975.88 2,401.87

Other income

The key components of our other income are: (i) interest income on fixed deposits, other financial assets and other deposits; (ii) insurance claim received; (iii) liabilities no longer written back and (iv) miscellaneous income in the nature of grant received from Government of Telangana under Industrial Investment Promotion Policy 2010-15 scheme ("IIPP 2010-15"), warranty reversal, recovery of bad debts written off and interest on Income Tax refund.

Our Expenses

Our expenses primarily consist of the following:

Cost of materials consumed consists of the cost of materials consumed by us during the course of our operations. Purchases of stainless steel plates, coils, mild steel plates, carbon steel plates, vacuum pumps, chemicals, and stainless steel and mild steel pipes, comprise the majority of our cost of materials, followed by cost of purchase of rods, gear boxes, motors, and mechanical seals.

Changes in inventories of finished goods and work-in-progress reflects the difference between our opening stock and closing stock.

Employee benefits expense consists of salaries, wages and bonus, contribution to provident and other funds, gratuity and compensated absences expenses and staff welfare expenses.

Finance costs includes interest expense on borrowing cost measured at amortised cost, interest on lease liabilities and other finance costs in the nature of processing fee on working capital renewals and bank charges including towards lines of credit and bank guarantee facilities.

Depreciation and amortisation comprises depreciation expenses on our property, plant and equipment and amortization expenses on our intangible assets and right of use assets. Our depreciation and amortisation expenses also includes the impact of the amortisation of right of use assets under Ind AS 116.

Other expenses primarily includes (i) stores and spares consumed, (ii) freight and forwarding charges, (iii) security charges, (iv) repairs and maintenance expenses, (v) power and fuel expenses, (vi) labour charges, (vii) travelling and conveyance expenses, (viii) rent expenses, (ix) advertising and sales promotion expenses, (x) corporate social responsibility expenses, (xi) legal and professional fees and (xii) expected credit losses.

Our Tax Expenses

Elements of our tax expense are as follows:

Current tax: Our current tax is the amount of tax payable based on the taxable profit for the year / period as determined in accordance with the applicable tax rates and the provisions of the Income Tax Act, 1961.

Deferred tax: Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the corresponding amounts used for taxation purposes. Our deferred tax is measured based on the applicable tax rates and tax laws that have been enacted or substantively enacted by the relevant balance sheet date.

Other Comprehensive Income for the period / year

The other comprehensive income consists of items that will not be reclassified to profit or loss in subsequent period, in the nature of remeasurement of post employment benefit plans and income tax on items not to be reclassified to profit or loss.

Total Comprehensive Income for the period / year

Total comprehensive income for the period / year consists of profit for the period / year and other comprehensive income for the period / year.

Our Results of Operations

The following table sets forth a breakdown of our restated results of operations for the Fiscals ended March 31, 2024, March 31, 2023 and March 31, 2022:

Year ended March 31, 2024 Year ended March 31, 2023 Year ended March 31, 2022
Particulars ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue
Revenue from operations 5,436.69 98.91 4,975.88 99.50 2,401.87 99.46

 

Year ended March 31, 2024 Year ended March 31, 2023 Year ended March 31, 2022
Particulars ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue
Other income 60.12 1.09 24.88 0.50 13.15 0.54
Total Income 5,496.81 100.00 5,000.76 100.00 2,415.02 100.00
Expenses
Cost of materials consumed 3,516.61 63.98 2,996.65 59.92 1,391.87 57.63
Change in inventories of finished goods and work-in- progress (339.94) (6.18) (141.74) (2.83) (240.42) (9.96)
Employee benefits expense 207.68 3.78 157.52 3.15 135.21 5.60
Finance costs 117.90 2.14 86.96 1.74 37.73 1.56
Depreciation and amortisation expense 93.28 1.70 77.07 1.54 42.36 1.75
Other expenses 1,103.27 20.07 1,105.77 22.11 710.57 29.42
Total expenses 4,698.80 85.48 4,282.23 85.63 2,077.32 86.02
Profit Before Tax 798.01 14.52 718.53 14.37 337.70 13.98
Tax expenses
Current tax
- for the current year 197.05 3.58 182.40 3.65 90.77 3.76
- pertaining to earlier year(s) 0.77 0.01 (0.29) (0.01) - -
Deferred tax 0.08 0.00 2.18 0.04 (4.52) (0.19)
Total tax expense 197.90 3.60 184.29 3.69 86.25 3.57
Profit for the year 600.11 10.92 534.24 10.68 251.45 10.41
Other Comprehensive Income
a) Items that will not be reclassified to profit and loss
(i) Remeasurement of post- employment defined benefit plan 0.53 0.01 (0.71) (0.01) 0.72 0.03
(ii) Income-tax relating to the above items (0.13) (0.00) 0.18 0.00 (0.18) (0.01)
Restated other comprehensive income/(loss) for the year 0.40 0.01 (0.53) (0.01) 0.54 0.02
Total comprehensive income for the year 600.51 10.92 533.71 10.67 251.99 10.43

Restated profit for the year attributable to:

Year ended March 31, 2024 Year ended March 31, 2023 Year ended March 31, 2022
Particulars ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue ( ) in million (%) of Total Revenue
Owners of the parent 583.84 10.62 534.24 10.68 251.45 10.41
Non-controlling interests 16.27 0.30 - - - -

Fiscal 2024 compared to Fiscal 2023

Total income

Our total income increased by 9.92% from 5,000.76 million for Fiscal 2023 to 5,496.81 million for Fiscal 2024 for the reasons set out below:

Revenue from Operations:

( in million)

Particulars Fiscal 2024 Fiscal 2023
Revenue from contracts with customers
Sale of products 5,348.38 4,917.03
Sale of services 80.56 46.19
Other Operating revenue
Scrap sales 7.75 12.66
Total revenue from operations 5,436.69 4,975.88

Revenue from Operations increased by 9.26% from 4,975.88 million in Fiscal 2023 to 5,436.69 million in Fiscal 2024. This increase was primarily due to the following

Increase in overall quantity of products sold during the year in line with increased production. In addition to increase in production, we also acquired a new manufacturing facility for manufacture of PTFE lined pipes and fittings on a slump sale basis during the Fiscal 2024, which in turn allowed us increase our offerings as well as quantities; Increase in sale prices of our products during Fiscal 2024 in line with change in product mix and specifications;

Increase in sale of services from 46.19 million in Fiscal 2023 to 80.56 million in Fiscal 2024 due to services provided under annual maintenance contracts and comprehensive maintenance contracts; and

However, the increase in revenue from operations was partially offset by a decrease in other operating revenue from 12.66 million in Fiscal 2023 as compared to 7.75 million in Fiscal 2024, in the nature of scrap sales.

Other Income:

Our other income increased by 141.64% from 24.88 million in Fiscal 2023 to 60.12 million in Fiscal 2024, primarily on account on increase in interest income on fixed deposits at amortized cost from 1.06 million in Fiscal 2023 to 39.12 million in Fiscal 2024. The increase in fixed deposits as at March 31, 2024 was due to temporary investment of a portion of the funds received by the Company during Fiscal 2024 towards investment in equity share capital of the Company amounting to 1,932.07 million.

Total expenses:

Our total expenses increased by 9.73% from 4,282.23 million in Fiscal 2023 to 4,698.80 million in Fiscal 2024. This increase was mainly due to the following factors:

Cost of materials consumed: Our cost of materials consumed increased by 17.35% from 2,996.65 million in Fiscal 2023 to 3,516.61 million in Fiscal 2024. The increase was mainly due to an increase in volume of raw material (stainless steel and nickel alloy) purchased during the year in line with increased sales and addition of SFPL Unit in Fiscal 2024 for the manufacture of PTFE lined pipes and fittings, which was acquired on slump sale basis pursuant to a business transfer agreement dated May 24, 2023, partially offset by a decrease in the price of materials, such as stainless steel and carbon/ mild steel.

Changes in inventories of finished goods and work-in-progress: Changes in inventories of finished goods and work-in-progress was (141.74) million in Fiscal 2023, as compared to (339.94) million in Fiscal 2024. This increase in inventories was due to addition of a new facility engaged in the manufacture of PTFE lined pipes and fittings, including inventories of such facility, and increase in the finished goods at the end of the year.

Employee benefits expense: Our employee benefits expense increased by 31.84% from 157.52 million in Fiscal 2023 to 207.68 million in Fiscal 2024. This increase was primarily due to a 36.19% increase in salaries, wages and bonus from 133.43 million in Fiscal 2023 to 181.72 million in Fiscal 2024. This increase was due to increase in the number of employees employed by us.

Finance costs: Our finance cost increased by 35.58% from 86.96 million in Fiscal 2023 to 117.90 million in Fiscal 2024. This increase was primarily due to increase in interest expense on working capital loans availed which is in line with increased in working capital borrowings due to increase in the operations.

Depreciation and amortisation expense: Our depreciation and amortisation expense increased by 21.03% from 77.07 million in Fiscal 2023 to 93.28 million in Fiscal 2024. This was primarily due to addition of a new facility engaged in the manufacture of PTFE lined pipes and fittings, which has commenced the operations from June 1, 2023.

Other expenses: Our other expenses decreased marginally by 0.23% from 1,105.77 million in Fiscal 2023 to 1,103.27 million in Fiscal 2024. This was primarily due to an increase in (i) travel and conveyance expenses from 10.89 million in Fiscal 2023 to 26.75 million in Fiscal 2024; (iii) allowance for ECL of 2.54 million in Fiscal 2023 as compared to 17.48 million in Fiscal 2024; (iv) advances written off amounting to 8.45 million in Fiscal 2024 as compared to Nil in Fiscal 2023; and (v) CSR expenses of

2.20 million in Fiscal 2023 as compared to 13.87 million in Fiscal 2024. The increase in other expenses was offset by a decrease in (i) stores and spares consumed from 231.08 million in Fiscal 2023 to 200.69 million in Fiscal 2024 and (ii) power and fuel charges from 131.98 million in Fiscal 2023 to 123.91 million in Fiscal 2024 and (iii) labour charges from 535.09 million in Fiscal 2023 to 531.81 million in

Fiscal 2024.

Profit before tax: As a result of the factors outlined above, our profit before tax increased by 11.06% from 718.53 million in Fiscal 2023 as compared to 798.01 million in Fiscal 2024.

Tax expense

Current tax: We recorded a current tax expense of 182.11 million in Fiscal 2023 as compared to 197.82 million in Fiscal 2024. This increase was primarily due to increase in profit before tax.

Deferred tax: We recorded a 2.18 million deferred tax expense for Fiscal 2023 as compared to 0.08 million in Fiscal 2024.

Profit for the period / year: As a result of the factors outlined above, our profit for the year increased by 12.33% from 534.24 million in Fiscal 2023 to 600.11 million in Fiscal 2024.

Fiscal 2023 compared to Fiscal 2022

Total Income

Our total income increased by 107.07% from 2,415.02 million for Fiscal 2022 to 5,000.76 million for Fiscal 2023 for the reasons set out below:

Revenue from Operations:

( in million)

Particulars Fiscal 2023 Fiscal 2022
Revenue from contracts with customers
Sale of products 4,917.03 2,387.98
Sale of services 46.19 11.33
Other Operating revenue
Scrap sales 12.66 2.56
Total revenue from operations 4,975.88 2,401.87

Revenue from Operations increased by 107.17% from 2,401.87 million in Fiscal 2022 to 4,975.88 million in Fiscal 2023. This increase was mainly due to the following:

Increase in overall production and sale of products in Fiscal 2023 as compared to Fiscal 2022. The increase in overall production capacities and production was on account of the completion of the acquisition of the business of M/s S2 Engineering Services and M/s Stanpumps Engineering Industries (four facilities - S2 Unit 1, S2 Unit 2, S2 Unit 3 and S2 Unit 4) in the second half of Fiscal 2022, which are engaged in manufacturing stainless steel and nickel alloy equipment and supply and service of vacuum pumps. These manufacturing facilities were acquired on a slump sale basis pursuant to a business transfer agreement dated October 25, 2021 and commenced operations in Fiscal 2022. The operations of Fiscal 2023 reflects a full year of operations of these additional facilities and our enhanced production capacities; Increase in sale prices in Fiscal 2023 as compared to Fiscal 2022, in line with increase in cost of certain raw materials, such as carbon/ mild steel, stainless steel and nickel alloy; and

Increase in our revenue from sale of services from 11.33 million in Fiscal 2022 to 46.19 million in

Fiscal 2023 due to services provided under annual maintenance contracts and comprehensive maintenance contracts.

Other Income

Our other income increased by 89.20% from 13.15 million in Fiscal 2022 to 24.88 million in Fiscal 2023, primarily on account on increase in miscellaneous income from 0.29 million in Fiscal 2022 to 22.61 million in Fiscal 2023. This was partially offset by liabilities no longer required written back of 3.17 million in Fiscal 2022 as compared to Nil in Fiscal 2023. The increase in miscellaneous income in Fiscal 2023 as compared to Fiscal 2022 is mainly due to receipt of subsidy under the IIPP 2010-15 scheme.

Total expenses:

Our total expenses increased by 106.14% from 2,077.32 million in Fiscal 2022 to 4,282.23 million in Fiscal 2023. This increase was mainly due to the following factors:

Cost of materials consumed: Our cost of materials consumed increased by 115.30% from 1,391.87 million in Fiscal 2022 to 2,996.65 million in Fiscal 2023. The increase was mainly due to an increase in volume of raw material (stainless steel and nickel alloy) purchased during the year in line with increased sales, coupled with increase in the price of materials.

Changes in inventories of finished goods and work-in-progress: Changes in inventories of finished goods and work-in-progress was (240.42) million in Fiscal 2022, as compared to (141.74) million in Fiscal 2023. This was primarily due to increase in the purchases of raw materials during the year in Fiscal 2023 and as compared to Fiscal 2022, in line with increased orders on hand as of March 31, 2023 as compared to March 31, 2022.

Employee benefits expense: Our employee benefits expense increased by 16.50% from 135.21 million in Fiscal 2022 to 157.52 million in Fiscal 2023. This increase was primarily due to an increase in salaries, wages and bonus from 119.17 million in Fiscal 2022 to 133.43 million in Fiscal 2023, and an increase in expenses towards staff welfare from 7.03 million in Fiscal 2022 to 15.90 million in Fiscal 2023. This increase was due to an increase in the number of employees employed by us and annual compensation increments.

Finance costs: Our finance cost increased by 130.48% from 37.73 million in Fiscal 2022 to 86.96 million in Fiscal 2023. This increase was primarily due to increase in interest expense on borrowing costs measured at amortised cost to 59.06 million in Fiscal 2023 from 20.85 million in Fiscal 2022, in line with an increase in the overall level of borrowings due to increase in the operations of Company.

Depreciation and amortisation expense: Our depreciation and amortisation expense totaled 77.07 million in Fiscal 2023, an increase of 81.94% over depreciation and amortisation expense of 42.36 million in Fiscal 2022. This was primarily due to additional of four additional facilities during the Fiscal 2022, which became operational in Fiscal 2022.

Other expenses: Our other expenses increased by 55.62% from 710.57 million in Fiscal 2022 to 1,105.77 million in Fiscal 2023. This was primarily due to an increase in (i) stores and spares consumed from 197.32 million in Fiscal 2022 to 231.08 million in Fiscal 2023, (ii) freight and forwarding charges from 43.51 million in Fiscal 2022 to 60.72 million in Fiscal 2023, (iii) power and fuel charges from 98.50 million in Fiscal 2022 to 131.98 million in Fiscal 2023; (iv) labour charges from 282.24 million in Fiscal 2022 to 535.09 million in Fiscal 2023 and (v) advertising and sales promotion expenses from

0.44 million in Fiscal 2022 to 12.54 million in Fiscal 2023. These increases were partially offset by decrease in (i) allowance for ECL from 8.19 million in Fiscal 2022 to 2.54 million in Fiscal 2023 and

(ii) advances written off of 2.18 million in Fiscal 2022 to Nil in Fiscal 2023. The increase in other expenses was in line with the increase in revenues from operations.

Profit before tax: As a result of the factors outlined above, our profit before tax increased by 112.77% from

337.70 million in Fiscal 2022 as compared to the profit before tax of 718.53 million in Fiscal 2023.

Tax expense

Current tax: We recorded a current tax expense of 90.77 million in Fiscal 2022 as compared to a current tax expense of 182.11 million in Fiscal 2023. This increase was primarily due to increase in profit before tax in the Fiscal 2023.

Deferred tax: We recorded a (4.52) million deferred tax expense for Fiscal 2022 as compared to 2.18 million in Fiscal 2023.

Profit for the period / year: As a result of the factors outlined above, our profit for the year increased by 112.46% from 251.45 million in Fiscal 2022 to 534.24 million in Fiscal 2023.

Liquidity and Capital Resources

Capital Requirements

For Fiscal 2024, Fiscal 2023 and Fiscal 2022, we met our funding requirements, including capital expenditure, satisfaction of debt obligations, investments, taxes, working capital requirements and other cash outlays, principally with funds generated from operations with the balance principally met using external borrowings.

The following table sets forth information on liquidity and capital resources as at the dates indicated:

( in million)

As at March 31
Particulars 2024 2023 2022
Cash and cash equivalents at the end of the year 154.55 54.21 1.17
Non Current borrowings 5.79 30.30 67.89
Current Borrowings 1,132.03 570.32 423.61
Leases 155.42 219.00 206.58
Bank balances other than cash and cash equivalent 364.88 - -
Other Financial assets (FD portion/Margin money deposit) 920.28 36.51 19.81

Cash Flows

The following table sets forth certain information concerning our cash flows for Fiscal 2024, Fiscal 2023 and Fiscal 2022 indicated:

( in million)

Particulars For year ended March 31, 2024 For year ended March 31, 2023 For year ended March 31, 2022
Net cash flow (used in) / generated from operating activities (650.27) 17.51 (71.49)
Net cash used in investing activities (1,568.34) (290.17) (297.38)
Net cash flow (used in) / generated from financing activities 2,318.95 325.70 369.97

Net cash flow (used in) / generated from operating activities

For Fiscal 2024, our net cash flow used in operating activities was (650.27) million which primarily comprised of (i) profit before tax for the year of 798.01 million which was adjusted primarily for, among other things, depreciation and amortization expense of 93.28 million and finance cost of 117.90 million; (ii) working capital changes; and (iii) income taxes paid (net of refund). Working capital changes primarily included, inter-alia, increase in inventories of (813.93) million, increase in trade receivables of (658.28) million and decrease in other financial assets of 12.02 million, increase in other current assets of (139.06) million , offset by increase in trade payables of 137.39 million and increase in other current liabilities of 31.22 million. Net cash flow from operating activities also included income taxes paid (net of refund) of (188.49) million.

For Fiscal 2023, our net cash flow generated from operating activities was 17.51 million which primarily comprised of (i) profit before tax for the year of 718.53 million which was adjusted primarily for, among other things, depreciation and amortization expense of 77.07 million and finance cost of 86.96 million; (ii) working capital changes; and (iii) income taxes paid (net of refund). Working capital changes primarily included, inter-alia, increase in inventories of (174.82) million, increase in trade receivables of (102.59) million, increase in other financial assets of (25.67) million, decrease in other current assets of 103.03 million, offset by increase in trade payables of 124.92 million and decrease in other current liabilities of (599.58) million. Net cash flow from operating activities also included income taxes paid (net of refund) of (204.93) million.

For Fiscal 2022, our net cash flow used in operating activities was (71.49) million which primarily comprised of (i) profit before tax for the year of 337.70 million which was adjusted primarily for, among other things, depreciation and amortization expense of 42.36 million and finance cost of 37.73 million; (ii) working capital changes; and (iii) income taxes paid (net of refund). Working capital changes primarily included, inter-alia, increase in inventories of (481.88) million, increase in trade receivables of (392.89) million, increase in other financial assets of (17.77) million, increase in other current assets of (56.65) million, offset by increase in trade payables of 148.80 million and increase in other current liabilities of 420.16 million. Net cash flow from operating activities also included income taxes paid (net of refund) of (85.05) million.

Net cash flow used in investing activities

For Fiscal 2024, our net cash flow used in investing activities was (1,568.34) million which was towards payments for acquisition of property, plant and equipment of (331.03) million, payments for acquisition of intangible assets of (4.99) million and investment in deposits of (1,248.65) million which was partially offset by interest received of 16.33 million.

For Fiscal 2023, our net cash flow used in investing activities was (290.17) million which was towards payments for acquisition of property, plant and equipment of (292.20) million and payments for acquisition of intangible assets of (2.26) million which was partially offset by proceeds from loans to related parties of 2.48 million and interest received of 1.81 million.

For Fiscal 2022, our net cash flow used in investing activities was (297.38) million which was towards payments for acquisition of property, plant and equipment of (51.34) million, payments made for business combinations, net of cash acquired of (261.18) million, loans to related parties of 10.86 million and payments for acquisition of intangible assets of (1.66) million which was partially offset by proceeds from loans to related parties of 0.02 million and interest received of 5.92 million.

Net cash flow (used in) / generated from financing activities

For Fiscal 2024, our net cash flow from financing activities was 2,318.95 million which primarily comprised of proceeds from issue of equity shares to owners of 1,931.96 million, proceeds from issue of equity shares to non - controlling interest ("NCI") of 0.10 million and net proceeds from current borrowings of 561.71 million, which was partially offset by finance costs of (101.30) million, payment of principal portion of lease liabilities of (32.41) million, payment of interest portion of lease liabilities of (16.60) million and net repayment of long term borrowings of (24.51) million.

For Fiscal 2023, our net cash flow from financing activities was 325.70 million which primarily comprised of proceeds from issue of equity shares to owners of 333.90 million and net proceeds from current borrowings of

146.70 million, which was partially offset by finance costs of (67.05) million, payment of principal portion of lease liabilities of (30.35) million, payment of interest portion of lease liabilities of (19.91) million and net repayment of long term borrowings of (37.59) million.

For Fiscal 2022, our net cash flow from financing activities was 369.97 million which primarily comprised of proceeds from issue of equity shares to owners of 211.03 million and net proceeds from current borrowings of

206.55 million, which was partially offset by finance costs of (23.39) million, payment of principal portion of lease liabilities of (12.59) million and payment of interest portion of lease liabilities of (14.34) million.

Contractual Obligations

The following table sets forth the details regarding our contractual maturities (representing undiscounted contractual cash-flows) of financial liabilities as of the respective periods mentioned:

(in million)

As at March 31, 2024 Contractual cash flows
Particulars Carrying value Less than 1 year 1-3 years 3-5 years More than 5 years Total
Non-current borrowings 38.32 32.53 5.79 - - 38.32
Current borrowings 1,099.50 1,099.50 - - - 1,099.50
Trade payables 887.06 886.42 0.64 - - 887.06
Other financial liabilities 17.55 17.55 - - - 17.55
Total 2,042.43 2,036.00 6.43 - - 2,042.43
As at March 31, 2023 Contractual cash flows
Particulars Carrying value Less than 1 year 1-3 years 3-5 years More than 5 years Total
Non-current borrowings 70.84 40.54 30.30 - - 70.84
Current borrowings 570.32 570.32 - - - 570.32
Trade payables 749.66 749.66 - - - 749.66
Other financial liabilities 7.73 7.73 - - - 7.73
Total 1,398.55 1,368.25 30.30 - - 1,398.55
As at March 31, 2022 Contractual cash flows
Particulars Carrying value Less than 1 year 1-3 years 3-5 years More than 5 years Total
Non-current borrowings 109.15 41.26 67.89 - - 109.15
Current borrowings 423.61 423.61 - - - 423.61
Trade payables 624.76 624.76 - - - 624.76
Other financial liabilities 20.52 20.52 - - - 20.52
Total 1,178.04 1,110.15 67.89 - - 1,178.04

Indebtedness

As of May 31, 2024, we had total outstanding borrowings amounting to 1,816.47 million, which consisted, interalia fund based working capital loans and term loans from banks. For further details related to our indebtedness, see "Financial Indebtedness" on page 406.

Ageing Schedule of Financial Liabilities

The table below provides details regarding the ageing of significant financial liabilities as of March 31, 2024

( in million)

Outstanding for following periods from due date of payment
Less than 1 year 1-2 years 2-3 years More than 3 years Total
(i) MSME 69.11 - - - 69.11
(ii) Others 817.31 0.60 0.04 0.00 817.95
(iii) Disputed dues - MSME - - - - -
(iv) Disputed dues - Others - - - - -
Total 886.42 0.60 0.04 0.00 887.06

Contingent Liabilities, Commitments and Guarantees

Set out below are the details of our contingent liabilities, capital commitments and guarantees as of March 31, 2024:

Particulars Amount

( in million)

Contingent liabilities
Bank guarantee issued on behalf of third parties 251.99
Capital commitments
Estimated amount of contracts remaining to be executed on capital account and not provided for: 33.94
Property, plant and equipment
Guarantees
Letter of credit issued to supplier/vendors 26.49
Total 312.42

Auditor Observations

There are no qualifications, reservations and adverse remarks by our Statutory Auditors in our Restated Financial Information.

Related Party Transactions

We have entered into related party transactions with, amongst others, members of our Promoter Group and our Key Managerial Personnel.

For further information on our related party transactions, see "Summary of the Offer Document Summary of Related Party Transactions" on page 29. Also, see "Risk Factors We have in the past entered into certain related party transactions and may continue to do so in the ordinary course of our business and we cannot assure you that such transactions will not have an adverse effect on our results of operation and financial condition." on page 54.

Off-Balance Sheet Transactions

We have not entered into any off-balance sheet transactions.

Quantitative and Qualitative Disclosures

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Companys exposure to the risk of changes in foreign exchange rates relates primarily to the Companys operating activities (when revenue or expense is denominated in a different currency from the Companys functional currency). The Company did not have any material unhedged foreign currency exposures for each of March 31, 2023 and March 31, 2022. As at March 31, 2024, we had unhedged foreign currency exposure towards trade receivables amounting to 0.02 million and towards trade payables of 0.02 million.

Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments if a counterparty default on its obligations. Our exposure to credit risk arises majorly from trade and other receivables. Other financial assets like security deposits and bank deposits are mostly with government authorities and scheduled banks and hence, we do not expect any credit risk with respect to these financial assets.

Our exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the customer, including the default risk of the industry and country in which the customer operates, also has an influence on credit risk assessment. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the group grants credit terms in the normal course of business.

We limit our exposure to credit risk of cash held with banks by dealing with highly rated banks and institutions and retaining sufficient balances in bank accounts required to meet a months operational costs. The management reviews the bank accounts on regular basis and fund drawdowns are planned to ensure that there is minimal surplus cash in bank accounts. We conduct financial and credibility check on landlords before taking any property on lease and we have not encountered any instance of non-refund of security deposit on vacating the leased property in the past three Fiscals. In some cases, we ensure that the notice period rentals are adjusted against the security deposits and only differential, if any, is paid out thereby further mitigating the non-realisation risk. We do not foresee any credit risks on deposits with regulatory authorities.

We limit our exposure to credit risk by generally investing in liquid securities and only with counterparties that have a good credit rating. We do not expect any losses from non-performance by these counter-parties, and do not have any significant concentration of exposures to specific industry sectors or specific country risks.

Commodity Price Risk

We are subject to market risks related to the volatility in the price of steel, and to a lesser extent, of nickel alloy. Our financial results can be affected significantly by fluctuations in these prices, which depend on many factors, including demand for these materials, changes in the economy, world-wide production levels, world-wide inventory levels and disruptions in the supply chain. However, there is no assurance our practices will adequately protect us from price fluctuations in steel or other raw materials. For further details, please see, "Risk Factors

We are dependent on a limited number of suppliers for our key raw materials such as stainless steel, carbon/ mild steel, nickel alloy, forgings, castings, chemicals and polytetrafluoroethylene powder. The loss of one or more of these suppliers could adversely impact our manufacturing processes and supply timelines, in turn adversely impacting our ability to comply with delivery schedules agreed with clients resulting in impact on our financial condition and results of operations" on page 45.

Interest Rate Risk

Interest rate risk is the risk that the fair value or future cash flows of the groups financial instruments will fluctuate because of changes in market interest rates. Our exposure to the risk of changes in market interest rate relates primarily to our borrowings with floating interest rates.

As at March 31, 2024, we had outstanding variable rate borrowings of 1,117.82 million that were at floating rate of interest linked to the MCLR of the respective banks, representing our total outstanding debt as at March 31, 2024. It exposes us to market risk as a result of changes in interest rates. We undertake debt obligations primarily to support our working capital needs and capital expenditure. Interest rates are highly sensitive to many factors beyond our control, including the monetary policies of the RBI, global interest rates, regulation of the financial sector in India, domestic and international economic and political conditions, inflation and other factors. Upward fluctuations in interest rates increase the cost of debt and interest cost of outstanding variable rate borrowings. We do not currently use any derivative instruments to hedge interest rate risk considering the short term rates charged by the bankers.

For further details, please see, "Risk factors We have incurred indebtedness and an inability to comply with repayment and other covenants in our financial arrangements could adversely affect our business and financial condition. Further, certain of our financial agreements involve variable interest rates and an increase in interest rates may adversely affect our results of operations and financial condition." on page 61.

Market Risk

Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the foreign currency exchange rates, interest rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments, foreign currency payables and debt.

Inflation Risk

In recent years, India has experienced relatively high rates of inflation. High fluctuation in inflation rates may make it more difficult for us to accurately estimate or control our costs. Further, inflation generally impacts the overall economy and business environment and hence could affect us.

Unusual or Infrequent Events or Transactions

Except as described in this Draft Red Herring Prospectus, there have been no events or transactions to our knowledge that have in the past or may in the future affect our business operations or financial performance which may be described as "unusual" or "infrequent".

Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices

Changes in revenue in the last three Fiscals are as described in " Fiscal 2024 as compared to Fiscal 2023", and

" Fiscal 2023 as compared to Fiscal 2022" above on pages 430 and 431, respectively.

Known Trends or Uncertainties

Other than as described in "Risk Factors" and this "Managements Discussion and Analysis of Financial

Condition and Results of Operations" on pages 42 and 410, respectively, to our knowledge there are no known trends or uncertainties that have or had or are expected to have a material adverse impact on our revenue or income from continuing operations.

Future Relationships Between Expenditure and Income

Other than as described in "Risk Factors" on page 42 and "Managements Discussion and Analysis of Financial

Condition and Results of Operations" on page 410, to our knowledge there are no known factors which we expect will have a material adverse impact on our operations or finances.

New Product or Business Segments

Other than as described in "Our Business" on page 244 there are no new products or business segments in which we operate.

Seasonality

We do not believe that our business exhibits any significant seasonal trends in revenues.

Significant dependence on suppliers or customers

We are dependent on certain key customers for a significant portion of our revenue and the loss of any one or more of such key customers for any reason (including due to loss of contracts or failure to negotiate acceptable terms during contract renewal negotiations, disputes with customers, adverse change in the financial condition of such customers, including due to possible bankruptcy or liquidation or other financial hardship, merger or decline in their sales, reduced or delayed customer requirements for our products, plant shutdowns, labour strikes or other work stoppages) could have an adverse effect on our business, results of operations and financial condition. For further details, please see "Risk Factors- Our revenue from operations is dependent upon a limited number of customers and the loss of any of these customers or loss of revenue from any of these customers could have a material adverse effect on our business, financial condition, results of operations and cash flows." on page 44.

For certain of our key raw materials, we are dependent on a limited number of suppliers. The loss of one or more of these suppliers could adversely impact our manufacturing processes and supply timelines, in turn adversely impacting our ability to comply with delivery schedules agreed with clients resulting in impact on our financial condition and results of operations. For further details, please see "Risk Factors- We are dependent on a limited number of suppliers for our key raw materials such as stainless steel, carbon/ mild steel, nickel alloy, forgings, castings, chemicals and polytetrafluoroethylene powder. The loss of one or more of these suppliers could adversely impact our manufacturing processes and supply timelines, in turn adversely impacting our ability to comply with delivery schedules agreed with clients resulting in impact on our financial condition and results of operations." on page 45.

Competitive Conditions

We expect competitive conditions in our industry to further intensify as new entrants emerge and as existing competitors seek to increase their offerings and benefit from economies of scale. For further details, please refer to "Risk Factors" and "Our Business" beginning on pages 42 and 244, respectively.

Total turnover of each major industry segment in which the company operated and Segment Reporting

Please refer to "Note 36- Restated Financial Information" on page 377 for details in relation to our segment reporting.

Significant Developments after March 31, 2024

Except as otherwise disclosed in this Draft Red Herring Prospectus and below, there are no subsequent development after the date of our financial statements contained in this Draft Red Herring Prospectus which materially and adversely affects, or is likely to affect, our operations or profitability, or the value of our assets, or our ability to pay our material liabilities within the next 12 months:

On June 3, 2024, our Company has allotted 163,471,068 Equity Shares pursuant to a bonus issue of Equity Shares in the proportion of nine Equity Shares for every one Equity Share held by the Shareholders as on the record date i.e. May 29, 2024, pursuant to the board resolution dated June 3, 2024.

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