Sterling Powergensys Ltd Management Discussions

Your Directors have pleasure in presenting the management discussion and analysis report of the year ended on 31^st March, 2024.

1. Overall & Business Review:

Post COVID era has been fruitful for the Company in terms of opening up of various opportunities in the solar power sector the main object of the Company. The Company, in previous financial year 2023-24 has seen considerable progress in its research and development programs, which are expected to bear positive results for the Company in the near future. The Company has been following the roadmap and specific goals which it had set for itself in the financial year 2022-23 and has been on the right track towards achieving the set goals in the near future. The Companys leadership team has been working tirelessly towards developing better and proactive strategies for achieving its core business purpose.

The Governments continued commitment towards ‘Net Zero by 2070 has also seen the Government taking major steps in enhancing viability gap funding program for green energy, The Government further aims to strengthen the domestic solar manufacturing eco-system aligned with its ‘Aatmanirbhar Bharat Vision and shall achieve the target of 500 GW renewable by 2030.

Some of the initiatives taken by the Government of India to boost Indias renewable energy sector is as follows

In the Interim Budget for 2024-2025, The Government of India doubled funding for the National Green Hydrogen Mission, allocating Rs. 600 crore (US$ 72 million). Additionally, Rs. 17,490 crore (US$ 2.10 billion) were allocated for the Green Hydrogen Mission and the Strategic Interventions for Green Hydrogen Transition (SIGHT) Programme, highlighting a commitment to sustainable energy transition.

In the Interim Budget for 2024-25, the fiscal allocation for solar power grid infrastructure development surged to Rs. 8,500 crore (US$ 1.02 billion), a significant rise from the previous years Rs. 4,970 crore (US$ 0.60 billion.)

As of January 2, 2024, the Government of India is implementing the Production Linked Incentive (PLI) Scheme for the National Programme on High Efficiency Solar PV Modules, aimed at achieving gigawatt-scale manufacturing capacity. Under Tranche-II, with a budget allocation of Rs 19,500 crore (US$ 2.35 billion), Letters of Award were issued in April 2023 for the establishment of 39,600 MW of fully or partially integrated solar PV module manufacturing units.

The Ministry of New and Renewable Energy (MNRE) has proposed the establishment of a 13,000 MW renewable energy (RE) capacity along with a 12,000 MWh Battery Energy Storage System (BESS) in Ladakh. On October 18, 2023, the Cabinet Committee on Economic Affairs approved the construction of an Inter-State Transmission System (ISTS) to facilitate the power evacuation and grid integration of these RE projects in Ladakh.

Proposed solar cities and parks: The Solar Park Scheme launched in December 2014 with a capacity of 20,000 MW was expanded to 40,000 MW by March 2017. As of November 30, 2023, 50 solar parks have been approved, totaling around 37,490 MW capacity across 12 states. Of these, 10,401 MW has been commissioned, including 284 MW in 2023.

On February 13, 2024, Prime Minister Mr. Narendra Modi launched PM Surya Ghar Muft Bijli Yojana, offering free rooftop solar electricity to 1 crore households, backed by subsidies and concessional loans.

On December 12, 2023, the Union Minister for New & Renewable Energy and Power reported the installation of 140 MW solar power plants and 2.73 lakh standalone solar pumps under PM-KUSUM, aimed at farmer welfare and environmental sustainability.

The Indian governments commitment to reaching net-zero emissions by 2070 and increasing its renewable energy target to 500 GW by 2030 at the COP26 summit has provided great support to the industry and spurred unprecedented growth.

On November 9, Minister for Finance & Corporate Affairs, Ms. Nirmala Sitharaman, approved the final Sovereign Green Bonds framework of India. The Paris Agreements Nationally Determined Contribution (NDC) targets will be further strengthened by this approval, which will also aid in attracting foreign and domestic capital to green projects.

In the Budget, the government allocated Rs. 19,500 crore (US$ 2.57 billion) for a PLI scheme to boost manufacturing of high-efficiency solar modules.

Indian Railways is making increased efforts through sustained energy efficient measures and maximum use of clean fuel to cut down emission levels by 33% by 2030.

Further note trading of commodity from Dubai branch is also much cost saving and revenue generating segment for the Company as branch situated in free zone and opens the avenues for global trading.

2. Industry Structure & Development:

India has recorded its highest annual installed renewable energy capacity of 18.5 (GW) for the fiscal year ending March 2024. India generated approximately 32 Billion Units (BU) of Solar Power in the last quarter of financial year 2023.24 which is an increase of 8.80% year over year. Rajasthan, Karnataka and Tamil Nadu were the top states for Solar Power generation amongst them Rajasthan witnessed the highest solar generation with 10.1 BU followed by Karnataka (4.3 BU) and Tamil Nadu (3.9 BU). Solar power accounted for 18.50 % of Indias total installed capacity and 42.90 % of the installed renewable capacity as on March 2024. To encourage project developers to add capacities The Ministry of Power (MoP) has amended the guidelines to the tariff-based competitive bidding process for procurement of firm and dispatchable renewable power from grid-connected solar, wind, wind-solar hybrid and renewable energy projects with energy storage in February 2024.

In addition, the Government has launched the National Programme on High Efficiency Solar PV Modules, which aims to promote the use of domestically manufactured high-efficiency solar panels in the countrys solar energy projects. The programme includes funding for research and development of new technologies and for the establishment of testing and certification facilities for solar panels.

3. Opportunities & Threats:

Opportunities India is the third largest energy consuming economy across the Globe. India has also made significant progress towards universal electrification but it still has one of the largest energy demand growth globally. The Indian sources have potential sources of power system flexibility includes not just demand side flexibility, power plant flexibility, storage and grid flexibility but also market and regulatory solutions that are to be implemented by 2030. Policy and tariff reforms will support the transformation of electricity demand from passive consumption to proactive participation. There is a rise in rooftop solar system as discussed earlier. The reduction in cost implies that the demand for wind and solar is increasing cost reduction is also a reason for the rapid transformation in global electricity.

Government finalizes all the wind and solar PV projects and provides Government backed auctions and incentives such as Tax Credits, relaxes concessions etc. Renewable sources of energy depends weather and topographical conditions. India is rich when it comes to renewable energy such as sunlight, water and air. This makes India a lucrative and flexible option to invest in renewable energy.

Threats: Besides the supply chain dynamics for solar power equipments as was discussed in the previous report, the management has also identified certain issues like grid management with unpredictable environments, continuously evolving energy policy and regulations, Increased cybersecurity risk from expanded infrastructure as the major threats looming over the renewable energy sector however, with increased technological advancements in the distribution sector these threats can be easily overcome in near future.

4. Product wise performance:

The research and development undertaken by the Company for expansion of Companies business in the green hydrogen projects for which Company is planning to raise the funds. Along with that commodity trading and solar segment is performed very well in the financial year 2023-24 and expecting to grow in the current financial year.

5. Outlook:

The outlook for the solar sector and hydrogen sector has never been so positive; Indias energy demand is expected to increase more than that of any other country in the coming decades due to its sheer size and enormous potential for growth and development. Therefore, most of this new energy demand must be met by low-carbon, renewable sources. Indias announcement that it intends to achieve net zero carbon emissions by 2070 and to meet 50% of its electricity needs from renewable sources by 2030 marks a historic point in the global effort to combat climate change. India was ranked fourth in wind power capacity and solar power capacity, and fourth in renewable energy installed capacity, as of 2023. Installed renewable power generation capacity has increased at a fast pace over the past few years, posting a CAGR of 15.4% between FY16 and FY23. India has 125.15 GW of renewable energy capacity in FY23. India is the market with the fastest growth in renewable electricity, and by 2026, new capacity additions are expected to double. With the increased support of the Government and improved economics, the sector has become attractive from an investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role.

6. Risk and concern:

Besides the supply chain dynamics for hydrogen and solar power equipments as was discussed in the previous report, the management has also identified certain issues like grid management with unpredictable environments, continuously evolving energy policy and regulations, Increased cybersecurity risk from expanded infrastructure as the major threats looming over the renewable energy sector however, with increased technological advancements in the distribution sector these threats can be easily overcome in near future. Eventhough the Company has no control over external factors which may adversely affect the Companys operation. These risk factors are continuously monitored by the management and necessary steps are taken to mitigate them.

7. Internal Control System and their adequacy:

The Company has strong internal control procedures in place that are commensurate with its size and operations. This ensures that all transactions are authorized, recorded and reported correctly. Regular internal audit and checks are carried out to ensure the robustness of the system.

8. Financial Performance:

During the year under review, the Company has recorded total revenue of Rs.1,061.16 Lakhs including the other income against the total revenue in the previous year of Rs. 33.24 Lakhs. Company has generated a Profit of Rs. 283.52 Lakhs for the year ended 31st March, 2024 as against loss in the previous year of Rs. 70.78 Lakhs.

9. Material Development in Human Resources / Industrial Relations:

Company recognizes the importance of motivated and empowered employees and has a clear employee value proposition focused on employee development, a satisfying work environment, performance appraisal, and appropriate empowerment. Further the Company believes motivated and empowered employees are the cornerstone of competitive advantage.

10. Key financial Ratios:

Following are the key financial ratios computed on Standalone basis:

Particulars	FY 2023-24	FY 2022-23	Movement	Remarks
Current Ratio	1.11	1.12	-0.33%
Debt / Equity Ratio	17.07	-2.01	948.68%	Due to reduction in EBITDA, Equity has reduced.
Debt Service Coverage Ratio	1.07	-1.49	-171.75%	Due to reduction in
Inventory Turnover Ratio	-1.91	0.00	0.00%	EBITDA during the current year
Debtors Turnover	1.44	24.55	-94.15%	Due to realisation of Trade receivables
Net Capital Turnover Ratio	3.80	0.24	1462.23%	Due to reduction in Net Current Assets
Net Profit Margin Ratio	0.41	-2.14	119.20%	Due to reduction in EBITDA during current year
Return on Capital Employed	1960.32%	29.96%	-7171.83%	Due to reduction in EBITDA during current year
Creditors Turnover (in days)	1.97%	20.13%	90.20%	Due to payments made to Trade Payables
Interest Coverage Ratio	22.66%	3.87%	485.24%	Due to reduction in EBITDA during current year

There is significant change (i.e. 25% or more as compared to the immediate preceding financial year) in the above key financial ratios due to financial distress of the Company.

11. Cautionary Statement:

Statement in this report on Management Discussion & Analysis describing the Companys projections and estimates may be forward looking and are based on certain assumptions and expectations of future events. Actual results may differ from projections due to demand-supply condition, prices of finished goods and raw material, changes in Government regulations, tax structure and other factors. The Company assumes no responsibility in respect of forward-looking statements which may undergo change on the basis of subsequent development events.