starlit power systems ltd share price Management discussions

1. About Us

Starlit Power Systems Limited was incorporated in the year 2008 with initial focus on Manufacture and processing Lead and manufacturing and distribution of Secondary Power Storage Batteries. The Company is engaged in manufacture of Batteries for Power storage- Inverters, UPS, Solar and also E-Mobility application. The battery facility is integrated with a capacities to refine metal, alloys and Oxides that are the key Raw material needed for the production of the batteries. This in-house capacity to manufacture the main Raw material gives an added control over quality of its final products. Commercially, it allows Starlit to capture the value from the start. The Company is thus in both B2C, selling batteries to the customers as also in B2B selling metal and oxides to the Industrial users including other battery players. This provides an additional hedge to the business.

The Companys continuous efforts towards research and development helps in improving its product portfolio. The R&D labs of the Company has sophisticated equipments. Company has recently refurbished the R&D lab to augment its R&D efforts and further improve its product qualities.

Company keeps a watchful eye over its quality. Starlit keeps monitoring its quality standards time to time with the help of parameters such as no. of complaints/100 battery of sale and sales quality return as percentage of sales.

Seeing the changes in technology, Starlit is also on the verge of starting new projects in futuristic technologies of lithium based intelligent battery systems with IOT which can capture communicate and control the battery and its usage. This will have applications across the Board in both mobility and stationary applications.

Starlit Power continue to innovate with development of new products to meet the industry growing need for convenience and product safety.

2. Macroeconomic Overview

The Indian macro Economic scenario remains much better than most countries. The Prudent policies followed by the Government has avoided the downward risks despite a challenging International economic and Geo-political environment. India is poised for a good growth and overall with shift in focus from hydrocarbon based Energy Policy to renewable, the need to storage is growing and will continue to see an upward movement. Battery trade in general is in a sweet spot and with new uses of Solar Power and e-mobility, the future looks bright. The scourge of COVID is behind us and we are looking at an era of relative steady growth. The world Economy is as per IMF poised to grow at 6% and Indian growth will be above that.

3. Industry Scenario

India Automotive Lead Acid Battery Market Outlook, 2023 gives a comprehensive analysis on the automotive lead acid battery industry of India. The market has observed a consistency in last five years and is expected to continue growing in next few years. Automotive manufacture comprises the production of two wheelers, three wheelers, commercial and passenger vehicles, truck, tractor, etc. The major causes for the growth include a steady rise in Disposable income, deep structural reforms done by the Government including introduction of GST, loosening of license Raj, Large domestic market and big ticket investments in infrastructure and Energy sectors.According to the report, Indias overall automotive lead acid battery market has grown with more than 10% CAGR over the reviewing period from year 2012-13 to 2017-18 and with the adoption of E-Vehicles, the double digit annual growth will move to higher 15-20% side.

Indias automotive lead acid battery market is led by two wheeler battery market, followed by four- wheelers and commercial battery market. As per the Society of India Automobile Manufacturers, the domestic sales of two wheelers in the country stood at more than 20 million units, which are expected to grow at a rapid pace over the next 5 years.

India has witnessed a tremendous growth in per capita income thereby resulting in more disposable income in the hands of its citizens. As a result, there has been a sharp increase in the sales of automobiles, particularly of the two wheelers. India has the most number of young people in the world. This is expected to spur the growth of two-wheeler lead acid batteries in the forecast period.

The automobile industry employs about 19 million people directly and indirectly. India is the 8 largest commercial vehicle manufacturers in the world. While it is the 2nd largest bus manufacturer, it ranks 5th globally in manufacturing heavy trucks.

Growing inclination towards pollution-free electric vehicles coupled with technological developments is expected to increase product demand over the upcoming years.

The two wheeler and four wheeler battery market is anticipated to contribute more than 65% market share of total automotive lead acid battery market by year 2022-23.

The Government of India has plans to make a major shift to electric vehicles by 2030. Even if India is able to achieve 50-70%, India will be one of the largest adopters of electric mobility. Starlit has taken steps to enter into this market and is working on designing and developing such Li based batteries with Battery management System (BMS) with strong and functional IOT systems.

4. Operational and Financial Performance

In financial year 2021-22, Net Sales decreased to Rs. 8.5 crores from Rs. 17.74 crores in financial year 2020- 21.EBIT loss for the financial year 2021-22 reduced to Rs. (3.04) crores against Rs.(6.47) crores in financial year 2020-21. Consolidated PAT for financial year 2021-22 is Rs. (2.33) crores against Rs. (4.79) crores to that of last year.

Despite being part of a growing sector and despite having a state of the art facility, the paucity of working capital and the banking woes continue to plague the Company.

5. Change in Return on Net Worth

For the return on Net worth for the financial year 2022, kindly refer the Financial Statements annexed to the Annual Report.

6. Human Resource and Industrial Relations

Starlit Power considers people as its biggest assets and Believing in People is at the heart of its human resource strategy. Concerted efforts have been put in talent management and succession planning practices, strong performance management and learning and training initiatives to ensure that Company consistently develops inspiring, strong and credible leadership. Starlit Power regards timely performance appraisals, which helps in employee motivation by encouraging them to work to their fullest potential. Starlit Power also promotes healthy, safe, and fun work environment to ensure a level of comfort amongst the employees and eliminate any stressful or awkward atmosphere that may hinder the performance of the staff. Starlit Power maintained healthy, cordial and harmonious industrial relations at all levels. Despite severe competition, the enthusiasm and unstinting efforts of the employees have enabled Company to remain at the forefront of the Industry. Company continued to receive cooperation and unstinted support from the distributors, retailers, stockists, suppliers and others associated with the Company as its trading partners.

7. Internal Control Systems

Starlit has established internal control systems commensurate with the size and nature of business. It has put in place systems and controls across the Company covering various financial and operational functions. The Company through its own Internal Audit Department carries out periodical Audits at various locations and functions based on the Audit Plan as approved by the Audit Committee.

Some of the salient features of the Internal control systems are:

a) An integrated ERP system connecting all Plants, Sales Offices, Head Office, etc.

b) Systems and Procedures are periodically reviewed to keep pace with the growing size and complexity of companys operations

c) Preparation of annual Budget for operations and services and monitoring the same at periodic intervals.

d) Assets are recorded and system put in place to safeguard against any losses or unauthorized disposal.

e) Periodic physical verification of fixed assets and Inventories.

f) Key observations arising out of the Internal Audit are reviewed at the Audit Committee meeting and follow up action taken

Further, enterprise wide adherence to corporate governance best practices is achieved through a combination of internal audits, management reviews and audit committee. The Company is thus able to secure and validate its business transactions on an ongoing basis and thereby maintain the accuracy of its financial records and the safety of its property. Most importantly, the senior management sets the tone at the top of no tolerance to non-compliance and promotes a culture of continuous innovation and improvement.

8. Opportunities and Threats

The Indian governments initiative to develop a 100 cities as smart cities that offer smart solutions to their citizens through the use of technology, information and data is expected to fuel demand for back-up power systems and hence batteries. Further, mobile broadband penetration in the form of Wi-Fi is very low in India and it is estimated that there will be a significant increase in the number of Wi-Fi hot spots, which will push sales of UPS and so the batteries that power them.The latest game-changer in the energy market is expected to come in the form of Battery Energy Storage Systems. With more renewable energy being pumped into the grid from utilities as well as decentralized generators, the distribution networks are becoming increasingly unstable. Battery Energy Storage Systems are meant for both grid scale as well as off- grid scale. The energy storage market for grid-connected and off-grid renewable is likely to provide significant opportunities.

The robust growth in automobile sales over the last few years has ensured medium and long-term opportunity for replacement battery sales, an area in which your Companys brand equity and strong channel relationship give it a huge competitive edge. While your Company has taken definitive steps in preparing for future demands of electric mobility, it is simultaneously ensuring technological upgrades in the lead-acid space that would keep it ahead of competitive threats.

The lead-acid battery business has seen a host of new players over the last few years, both at a regional and national level. Your Company is susceptible to constant pressure at a market level as these new players try to wean away consumers and channel partners essentially through low-price offerings. Your Company is addressing these challenges through the adoption of latest technologies and lean manufacturing practices in order to quickly develop differentiated products that will change the price-value equation in its favour.

9. Risks

There is an inherent threat from new battery technologies such as Lithium-Ion technology, which is likely to penetrate automotive applications as well as various industrial applications such as telecom, data centers, UPS, solar street lights and energy storage systems. Your Company is trying entering the Li-Ion battery business.

The brand equity of your Company is high and one of its key strengths. It has taken all necessary measures to build on it, ensuring controls to protect the brand. In view of increased penetration of social media, the inherent risk of communities, employees, and customers sharing their expectations, concerns and suggestions and so impacting the brand image has gone up. Your Company has implemented a Social Media Framework through a technology platform to ensure effective management of its reputation by timely redressal of concern, action on suggestions and enquiries.

Other actions for ensuring the protection of the brand includes the registration of the trademark in countries where the Company intends to sell its products. Your Company is also leveraging the know-how of collaborators to offer a great experience to the customer on product performance.

10. Future Outlook & Strategy

Starlit Power plans to continue to tap opportunities in its segments by launching innovative products and using technology to generate efficiencies across its business. The company is investing on an on-going basis on various research projects; some of these projects have started yielding results while many others are expected to come on stream in the next two years.

It is also taking steps to sort out the problems arising out of freezing of its account by the bank and also the fact that the Chinese stakeholder has been a dormant stake holder and is besieged with his own problems in China. The slight deterioration in the India china relations has also not helped in the matters. The company is however meaning fully engaged with bank to find an acceptable solution. The Company is hopeful that with its constructive approach, it will find a solution to its problems in next 2 quarters and then it would turn the fortunes of the Company.

The vision of Starlit Power is to be the most preferred National brand." Its mission is:

a) Rather modest and it is to capture a modest 2% of the market share of the Lead Acid Battery Industry in India in the next 5 years and to be known as a credible player offering products comparable with the best and backing it with services and customer connect which outshines others.

b) To enter into the Next Gen batteries using chemistries based on Lithium.

c) To carry out manufacturing activities using advanced technologies which conserve the natural resources and protect the Environment, Health and Safety of the persons involved

d) To meet customer needs through providing the quality products and services

To improve the quality of products continuously through Research & Development, Training and use of Upgraded Technology

11. Significant Change of Key Financial Ratios

There is no significant change in key financial ratios as if compared to the ratios of previous financial year.

12. Cautionary Statement

This report may contain "Forward Looking Statements" including, but without limitation, statements relating to the implementation of strategic initiatives, and other statements relating to Starlit Power future business developments and economic performance. While these Forward Looking Statements indicate the Companys assessment and future expectations concerning the development of the Companys business, a number of risks, uncertainties and other unknown factors could cause actual developments and results to differ materially from the expectations. These factors include, but are not limited to, general market, macroeconomic, governmental and regulatory trends, movements in currency exchange and interest rates, competitive pressures, technological developments, changes in the financial conditions of third parties dealing with the Company, legislative developments, and other key factors that could affect the Companys business and financial performance. Starlit Power undertakes no obligation to publicly revise any forward looking statements to reflect future / likely events or circumstances.