Swelect Energy Systems Ltd Management Discussions.

INDUSTRY STRUCTURE AND DEVELOPMENTS

KEY HIGHLIGHTS

SWELECT has grown to become a reliable EPC (Engineering Procurement and Construction) partner and also a trusted IPP (Independent Power Producer) player over the last few years offering the best in class installations as well as guaranteed power generations. SWELECT has earned it reputation for its industry leading O&M (Operations and Maintenance) service which has assured highest uptime for its customers. Further, SWELECT has established its presence in the Channels and Distribution market with high quality Bloomberg Tier 1 Solar PV Modules and Module Mounting Structures. The current COVID-19 situation had impacted the year, especially the manufacturing units with challenges such as lockdowns, leading to machinery uptime issues, manpower availability, raw material availability, increasing prices of raw material, threefold increase in the logistics cost of imported materials, availability of logistics for import shipment, disruption in supply chain etc. Through all these challenges, SWELECT has emerged strong and its sustained efforts to overcome these hurdles has led to having a respectable performance this year. Further, SWELECT has also shown its resilience by retaining its Financial Credit rating through the pandemic situation.

SOLAR POWER GENERATION AND SYSTEMS INTEGRATION (NEW ADDITIONS):

1. SWELECT has successfully commissioned a solar park for a Foundry cluster.

2. SWELECT is actively developing a Solar Power Park for its IPP customers and potential EPC customers with the state of the art technology and engineering.

3. SWELECT is well on its way to reach its milestone of 100 MW energy generation and will be completed in the Financial Year 2021-2022.

4. SWELECT has done well in the Channels and Distribution market with over 150% growth in this segment. BUSINESS DEVELOPMENT IN NEW MARKETS:

SWELECT is proud to announce that its once again listed in Bloombergs Tier 1 Module Manufacturer globally through all the quarters of the year.

SWELECT is actively working on several prototypes to get into the Energy Storage Market very soon.

SWELECT is also evaluating various other sustainable technologies and international partners to collaborate on the same. IRON AND STEEL FOUNDRY PRODUCTS:

AMEX Alloys Pvt. Limited, a Wholly Owned Subsidiary (WOS) of SWELECT Energy Systems Ltd, is an ISO 9001- 2015 certified Foundry located in Coimbatore sub urban area.

AMEX Alloys Pvt Ltd has the following capabilities to supply High Quality castings to the following industrial applications:

- Oil & Gas

- Transportation

- Marine

- Pharmaceuticals

- Infrastructure

- Agriculture

- Water Distribution

- Hydro Power and many Flow Control applications AMEX has three divisions of foundry units viz.,

Alloys Division: Design, Manufacturing, Machining & Export of a wide range of Steel Castings (using CO2 sand Process, cake moulds and a range of intricate core assembly based complex moulds). The range of castings cover WCB / Stainless Steel / Duplex and Special alloy steel

Iron Foundry Division: Design, Manufacturing, Machining & Sales in domestic markets and Export of a wide range of Iron Castings in Grey Iron and spheroidal Graphite Iron (using CO2 and Green sand Process) metallurgy.

Investment Casting Division: Design, Manufacturing, Machining & Export of a wide range of Investment Castings (using lost Wax process and advanced Machinery).

The above capabilities make AMEX Brand as Indias first Foundry Group offering all the above under one roof and a One- Stop- Solution Foundry

AMEX - Green Initiatives:

The foundry uses very less quantum of new sand by adapting to sand reclamation process thus reducing use of natural resources

Also maximum Energy is consumed from Green Energy sources (Solar and Wind Power) from AMEXs own Solar plant and from SELECT Group. As a WOS of SWELECT, AMEX Foundries have the distinction of running the foundry production with more than 85% of the Energy from Renewable Energy Sources and this is yet another special status.

AMEX - New Investments:

During the year 2020-21 a new sand automatic conveyer equipment installed for better utilization of sand and speed up the sand management @ the cost of Rs.59.79 lakhs, also established a new spacious pattern storage for handling the customer patterns @ the cost Rs.37.58 Lakhs.

A fully automated new sand plant and a high-pressure moulding line are under construction with a total budget of Rs.12 Crores approximately and this advanced facility should be fully ready and operational by end of second quarter in FY 2021-22, With this investment and a big leap in Automation, AMEX - Iron Foundry division is expected to double its capacity (up to 800 Tons of finished castings / month) in the coming quarters.

Foundry with latest state of art facilities:

AMEX has been deploying the most advanced casting design tool (MAGMA Simulation Software). The design team has been trained in MAGMA and this has enhanced AMEX to secure new orders from the existing customers and new customers from Europe. During this Financial Year, AMEX also exhibited its special skills and produced a range of intricate castings like Diverter valves, Flame Arrestor Bodies and Special Castings of higher weight range for German customers.

The Company has earned foreign exchange of over Rs.61.63 Lakhs in Euros and US Dollars during the financial year 2020-21 from the Exports to Europe, USA and China despite the COVID-19 pandemic situation Globally.

AWARDS / CREDENTIALS

> CIIs Performance Excellence Awards 2020 for Solar & Wind

• Leadership in Performance - Ground Mounted Solar category - SWEES Vellakoil Phase-ll, Vellakoil, Karur

• Leadership in Performance - Rooftop Solar Category - Integral Coach Factory, Chennai

• Leadership in Performance - Ground Mounted Solar category - SWEES (KREDL) Kunigal, Karnataka

> Soft disk Awards 2020

• SDs No.1 Company for having completed largest number of roof top installations

• SDs No.1 Hybrid Solar PV Power Solution Provider of the Year

• SDs No.1 Grid Sharing Solar PV Power Solution Provider of the Year

• SDs No.2 SPCU Manufacturer of the Year

• SDs No.5 Solar PV Panel Manufacturer of the Year

> India Leadership Awards 2020 - Best Performing Project of the Year

> National Awards for Excellence in Solar Energy 2020 - Best Module Manufacturer of the Year 2020

> RE Digital India Awards 2020 - Company of the Year - OEM

> PV Moduletech India Awards 2020 - Module Manufacturer of the Year: Make In India

> India Rooftop Solar Congress Awards 2021 - Best Project Developer of the Year: Industrial OPPORTUNITIES

While the entire global market is adapting to the new normal of the pandemic situation, world has also realized the primary need of the hour is climate change. SWELECT is already geared and ready for this cause and along with global leaders believes in addressing the climate change issue seriously by providing sustainable and affordable energy which is not only in terms of energy generation, but also in following low carbon footprint activities in sourcing, executing and maintenance. This opens up a business opportunity for SWELECT to establish its presence further with high quality, low carbon footprint services.

THREATS

With the current pandemic crisis, the governments resources have been deployed to address the medical emergency which is currently affecting the country. This has led to a decline in the focus towards power infrastructure development and this can be seen by the fewer number of contracts and tenders being published for competitive bidding. The current geopolitical tensions amongst the participating countries in the supply chain has created a momentary strain on the raw material prices and logistics rates which have to be addressed very seriously with innovative and strategic cost engineering as well as sourcing strategies.

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE (STANDALONE)

The Business of the Company falls under a single primary segment i.e., "Solar and other related activities" for the purpose of IND AS 108.

The Segment-wise and product-wise performance of the Company for the financial years 2019-20 and 2020-2021 is provided below:

Rs. in Lakhs

Product Name Revenue
31.3.2021 31.3.2020
Solar Photovoltaic Panels 4806.73 4495.53
Solar Power Generating Systems and accessories 5311.66 4358.49
Traded Goods 2545.38 297.75
Solar Power 3319.22 2595.19
Wind Power 100.03 110.90
Sale of Services 1875.49 1427.11
Grand Total 17958.51 13284.97

OUTLOOK

The Indian Solar Industry saw a sluggish growth owing to the impact of COVID-19 and it is expected to continue in the coming year. It is anticipated that the prices of raw material and the logistics costs will be on the increasing trend, but with the Government policies such as Production Linked Incentive, imposition of Basic Customs Duty (BCD) on cells and modules, promotion of Domestically Manufactured Modules, it is expected to give a boost for the Indian manufacturers.

RISKS AND CONCERNS

The Company continuously monitors business and operational risks through an efficient Risk Management System. All key functions and divisions are independently responsible to monitor risks associated within their respective areas of operations such as Production, Foreign Exchange, Insurance, Legal and other issues like health, Safety and Environment.

The Company has constituted Risk Management committee and Forex Management committee to continuously monitor business and operations risk through an efficient risk management system. The details of the committees are furnished in the Corporate Governance report.

RISK MANAGEMENT COMMITTEE

The Company is not falling under the category as specified in Regulation 21(5) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. However, the Company constituted Risk Management Committee to continuously monitor business and operations risk through an efficient risk management system.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope and authority of the Internal Audit function is defined by the management.

The internal audit report for every quarter ended are being submitted to the Audit Committee of the Board by the Internal Auditors.

The Internal Auditors monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board. Based on the report of internal auditors, the Audit Committee/Management of the Company undertakes corrective action in the respective areas and thereby strengthens the controls.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE Standalone

During the year, the Company registered a turnover of Rs.18453.22 Lakhs against the previous year turnover of Rs.14204.04 Lakhs registered a growth of 29.92% compared to previous year revenue. The Company has reported Profit for the current year Rs.2431.15 Lakhs against the previous year Loss of Rs.1673.16 Lakhs (the Company had to account for "Exceptional items" amounting to Rs.2471.99 Lakhs resulting in a Loss in the previous year and the reason for loss was explained in previous year report) .

The Earnings per Share (Basic and Diluted) for the year 2020-2021 stood at Rs.16.04

Stay powBrfJ when sun shines And thereafter...

Consolidated

During the year, the Company registered a turnover (Consolidated) of Rs.25,253.61 Lakhs against the previous year turnover of Rs.25,221.82 Lakhs registered a growth of 0.13% compared to previous year revenue.

The Company has reported Profit for the current year Rs.2,603.59 Lakhs against the previous year Loss of Rs.1,016.88 Lakhs (the Company had to account for "Exceptional items" amounting to Rs.1,522.61 Lakhs resulting in a Loss in the previous year and the reason for loss was explained in previous year report).

THE FINANCIAL HIGHLIGHTS OF THE COMPANY FOR THE LAST EIGHT YEARS (Standalone).

(Rs. In Lakhs)

S.No Particulars 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21
1 Revenue from operations 5,240.30 4,887.50 16,315.86 17,006.97 17,382.92 11,984.43 14,204.04 18,453.22
2 Other Income 2,936.00 2,478.58 3,339.12 4,615.85 3,807.93 3,494.58 3,170.98 3,279.04
3 Total income from operations 8,176.30 7,366.08 19,654.98 21,622.82 21,190.85 15,479.01 17,375.02 21,732.26
4 Employee Cost 597.69 665.75 1,112.23 1,151.30 1,140.03 1,264.19 1,194.66 1,217.53
5 Excise Duty 158.17 54.49 61.34 44.97 8.50 - - -
6 Other Operating Expenditure 4,363.61 4,216.20 14,232.86 14,941.83 15,031.85 10,544.70 12,484.42 14,595.67
7 Profit Before Finance cost, Depreciation and Amortisation and Tax 3,056.83 2,429.64 4,248.55 5,484.72 5,010.47 3,670.12 3,695.94 5,919.06
8 Finance cost 116.09 1,059.90 960.96 529.55 580.58 744.63 981.15 1,249.12
9 Depreciation and amortization 446.23 871.71 1,251.04 1,114.44 1,343.04 1,415.41 1,659.43 1,547.79
10 Profit before tax 2,494.51 294.91 2,118.22 3,840.73 3,086.85 1,540.08 1,055.36 3,122.15
11 Profit/(Loss) after tax 2,494.51 132.94 1,201.07 2,937.85 2,346.93 1,105.35 (1,673.16) 2,431.15
12 EPS (Rs.) 24.68 1.32 11.88 29.07 23.22 7.29 (11.04) 16.04
13 Interim Dividend paid (Rs. per share) - - 3.00 - - - 1.25 -
14 Dividend paid / proposed (Rs. per share) 9.00 2.50 1.00 4.00 4.00 2.50 0.75 *3.00

* Proposed

DETAILS OF KEY FINANCIAL RATIOS

S.No. Particulars 2020-2021 2019-2020 YOY change
1. Debtors Turnover ratio (times) 2.82 3.36 (0.54)
2. Inventory Turnover ratio (times) 3.64 2.88 0.76
3. Interest coverage ratio (times) 3.50 2.08 1.42
4. Current ratio (times) 2.46 2.26 0.20
5. Debt Equity Ratio (times) 0.40 0.19 0.21
6. Operating profit margin (%) 23.69 14.34 9.00
7. Net Profit margin (%) 16.92 5.62 11.00
8. Return on Net worth (%) 3.57 (2.54) 6.10

Note:

• The company has availed term loans for purchase of captive power plant which will aid in increased revenue generation. The increase in interest coverage ratio is an effect of the increase in debt.

• Operating profit has increased as a result of increase in power sales and better price negotiations resulting in increasing Net worth.

• Exceptional item eliminated / not considered above, since it is non-recurring and part of regular / operating business.

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES / INDUSTRIAL RELATIONS FRONT, INCLUDING NUMBER OF PEOPLE EMPLOYED:

Human Resources

Employees are vital and most valuable assets. The Company has a favourable work environment that encourages innovation and motivation. The Management continues to invest in people through various Learning & Development initiatives and believes in nurturing leaders among them, as far as possible and provide opportunities for growth across all levels. These continual initiatives should help the Company maintain the No.1 position in specific market verticals (Rooftop segment). The total number of people employed as on 31.3.2021 was 293.

Welfare / Social Activities:

The Company sponsors several team building, sports and social welfare activities to derive internal team building. SWEES EMPLOYEES WELFARE TRUST is a welfare society with its main object of working towards the welfare of its employees. The Company continued to focus on Corporate Social Responsibility related activities as prescribed by the Companies Act, 2013.

CAUTIONARY STATEMENT

Certain statements in this Management Discussion and Analysis Report describing the Company may be Forward Looking Statements within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the company operates, changes in the Government regulations, tax laws, statutes and other incidental factors.

For and on behalf of the Board of Directors
Sd/- Sd/-
R. CHELLAPPAN A.BALAN
Managing Director Joint Managing Director
Place: Coimbatore Place: Salem
Date: 14th June 2021 Date: 14th June 2021