Swelect Energy Systems Ltd Management Discussions

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

INDUSTRY STRUCTURE AND DEVELOPMENTS KEY HIGHLIGHTS

The Indian solar industry is undergoing significant transformation, with a growing emphasis on domestically manufactured solar photovoltaic panels and Balance of system components. The reinstatement of the Approved List of Module Manufacturers (ALMM) reflects the clear commitment of the Indian Government to foster and bolster the indigenous solar equipment manufacturing sector, thereby positioning India as a significant global player in both manufacturing and services segments of the solar industry.

In recent years, the Indian solar industry has undergone significant maturation, garnering widespread acceptance as a dependable and sustainable alternative to conventional power sources. Notably, India has successfully augmented its solar capacities by over 13 gigawatts during the FY 2023-2024.

Meanwhile, the Company has demonstrated commendable growth, achieving an impressive uptick of 8% in its topline. This growth can be attributed to our robust performance in product sales, execution of Turnkey EPC projects, and energy sales. Such achievements underscore our commitment to delivering value across diverse sectors and highlight our sustained efforts towards driving positive impact in the renewable energy landscape.

Expansion in Solar Power Generation and Systems Integration

1. Product Sales Revenue Growth: SWELECT has achieved a notable increase of over 12% in its product sales revenue, driven primarily by sales of solar panels, Module Manufacturing Structure (MMS) and Balance of System (BOS) items.

2. EPC Project Portfolio: The Companys order book currently stands at over 88 megawatts (MW) of Engineering, Procurement and Construction (EPC) projects. Of this total, 47 MW of projects have been successfully commissioned, showcasing SWELECTs ability to deliver on large-scale projects.

3. EPC Project Progress: Construction is underway for over 41 MW of projects, demonstrating SWELECTs ongoing commitment to project execution and delivery within stipulated timelines.

4. Energy Sales Projects: The Company has made significant strides in energy sales projects, with an additional capacity exceeding 46 MW. Notably, 22 MW of these projects have already been commissioned, underscoring the Companys capacity to convert projects into operational assets.

5. Ongoing Project Development: Construction activities are ongoing for the remaining 24 MW of energy sales projects, indicating SWELECTs sustained focus on expanding its operational footprint and contributing to Indias renewable energy objectives.

AWARDS / CREDENTIALS

0 National Awards for Excellence - 2023

• Manufacturer of the Year 2023 (SME & Large Organization)

0 Soft Disk Solar Awards - 2023

• Soft Disks No.1 Indian Rooftop Solution Company of the Year.

• Soft Disks No.1 Indian Grid Sharing Solar Power Solution Provider of the Year.

• Soft Disks No.1 Indian Off Grid Sharing Solar Power Solution Provider of the year.

• Soft Disks No.1 Company for the Largest Number of Rooftop Installations in India till March 31, 2023, in terms of both number of installations and wattage

0 Global Manufacturing Leadership Awards - 2023

• Top Manufacturing Company (Solar Powered Equipment)

Opportunities in the Clean Energy Sector

The escalating demand for clean energy, fueled by increasing energy requirements, offers significant business opportunities for Indian clean energy companies. The Indian Governments robust endorsement of the "Make in India" programme initiative and its ambition to establish the country as a global manufacturing hub will likely bolster Indian solar equipment manufacturers. Moreover, decreasing raw materials costs and technological advancements render investment in solar energy an increasingly attractive proposition. Additionally, Innovative financing models, spurred by the mandatory reduction of carbon footprints, have markedly enhanced the adoption of clean energy solutions.

Threats to the Solar Industry

The Indian solar industry frequently grapples with policy uncertainties and a lack of long-term vision, which introduces investment planning insecurities. Geopolitical tensions and trade disputes contribute to supply chain disruptions, presenting new challenges in project timelines and funding. Furthermore, grid integration issues, such as grid stability and availability, continue to pose significant hurdles in the sector. Land acquisition and the procurement of related permits remain chronic challenges that the industry must address.

SEGMENT-WISE AND PRODUCT-WISE PERFORMANCE (STANDALONE)

Business Segmentation Overview

SWELECT ENERGY SYSTEMS LIMITED (SESL) operates primarily under one business segment as defined under IND AS 108 — "Solar and other Related Activities". This classification underscores the companys focused strategy in the solar energy sector.

Product-Wise Performance for Financial Years 2022-2023 and 2023-2024

The Product-wise performance of the Company for the financial years 2022-2023 and 2023-2024 are detailed below:

		(Rs. in Lakhs)
	Revenue
Product Name	March 31, 2024	March 31, 2023
Solar Photovoltaic Panels	177.43	2,677.60
Solar Power Generating Systems and accessories	18,363.90	13,792.16
Traded Goods	374.51	912.31
Solar Power	4,354.88	3,879.61
Wind Power	121.98	93.84
Sale of Services	311.19	308.73
Grand Total	23,703.89	21,664.25

Outlook for the Indian Solar Industry

Indian solar industry presents a promising future and holds a central position in the global clean tech ecosystem. As one of the fastest developing economies, Indias need for clean energy is more urgent than ever. The governments ambitious target of achieving 500 GW of renewable energy capacity by 2030 is driving the industry to make significant investments in manufacturing capabilities within the country. Furthermore, the mandatory compliance with carbon neutrality, especially in Environmental, Social and Governance (ESG) aspects, has positioned solar energy as a viable and attractive investment. Technological advancements in grid integration solutions, particularly those that combine Solar, wind and storage, are opening new business avenues and addressing many of the grid integration challenges inherent to intermittent renewable energies.

RISKS AND CONCERNS

Currently, there are no notable risks or concerns as the management diligently monitor domestic and international market dynamics. The leadership team is proactively engaged in considering all major factors and working to mitigate any potential risks that may arise.

RISK MANAGEMENT COMMITTEE

Though the Company is not categorised under Regulation 21(5) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has established

a Risk Management Committee. This committee is tasked with continuously monitoring business and operational risks through an efficient risk management system.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company maintains an Internal Control System commensurate with the size, scale, and complexity of its operations. Management clearly defines the scope and authority of the Internal Audit function.

These reports assess the efficacy and adequacy of the internal control system within the Company, ensuring compliance with operating systems, accounting procedures and policies at all locations. Based on the findings of the internal auditors, the Audit Committee/Management takes corrective actions in respective areas, thereby strengthening the controls.

FINANCIAL PERFORMANCE WITH RESPECT TO OPERATIONAL PERFORMANCE

Standalone Performance

During the FY 2023-2024, the Company registered a turnover (Standalone) of 24,636.60 Lakhs, showcasing an increase from the previous year turnover of 22,891.46 Lakhs. This growth highlights the companys robust operational efficiency and market strategies.

The net profit for the year was notably higher at 5,130.05 Lakhs compared to 934.42 Lakhs in the previous year, demonstrating a significant improvement in profitability. The Earnings Per Share (EPS), both basic and diluted, stood at 33.84, reflecting the companys strong earnings potential and financial health.

The increase in Net Profit includes an exceptional gain of 1,684.79 Lakhs on account of sale of Wholly Owned Subsidiary Company namely AMEX Alloys Private Limited.

Consolidated Performance

The Company reported a turnover of 24,278.26 Lakhs for the FY 2023-2024, slightly below the previous years 24,570.14 Lakhs. Despite a marginal decrease in turnover, the companys consolidated financial health remains strong.

The net profit after tax for the current year was 6,309.96 Lakhs, a substantial increase from 642.11 Lakhs in the previous year, indicating effective cost management and operational optimizations. The EPS for the year was 41.63, suggesting enhanced shareholder value on a consolidated level.

The increase in Net Profit includes an exceptional gain of 3,249.66 Lakhs on account of sale of Wholly Owned Subsidiary Company namely AMEX Alloys Private Limited.

THE FINANCIAL HIGHLIGHTS OF THE COMPANY FOR TEN YEARS

(Standalone)

											(Rs. in Lakhs)
S.No	Particulars	2014-15	2015-16	2016-17	2017-18	2018-19	2019-20	2020-21	2021-22	2022-23	2023-24
1	Revenue from operations	4,887.50	16,315.86	17,006.97	17,382.92	11,984.43	14,204.04	18,453.22	28,572.86	22,891.46	24,636.60
2	Other Income	2,478.58	3,339.12	4,615.85	3,807.93	3,494.58	3,170.98	3,279.04	3,059.14	3,211.47	4,532.47
3	Total income from operations	7,366.08	19,654.98	21,622.82	21,190.85	15,479.01	17,375.02	21,732.26	31,632.00	26,102.93	29,169.07
4	Employee Cost	665.75	1,112.23	1,151.30	1,140.03	1,264.19	1,194.66	1,217.53	1,410.73	1,319.79	1,491.31
5	Excise Duty	54.49	61.34	44.97	8.50	-	-	-	-	-	-
6	Other Operating Expenditure	4,216.20	14,232.86	14,941.83	15,031.85	10,544.70	12,484.42	14,595.67	23,087.27	17,560.29	19,462.81
7	Profit Before Finance cost, Depreciation and Amortisation and Tax	2,429.64	4,248.55	5,484.72	5,010.47	3,670.12	3,695.94	5,919.06	7,134.00	7,222.85	8,214.95
8	Finance Costs	1,059.90	960.96	529.55	580.58	744.63	981.15	1,249.12	2,063.49	2,532.00	3,329.83
9	Depreciation and amortization	871.71	1,251.04	1,114.44	1,343.04	1,415.41	1,659.43	1,547.79	1,691.44	1,386.93	1,439.86
10	Profit before tax	294.91	2,118.22	3,840.73	3,086.85	1,540.08	1,055.36	3,122.15	3,379.07	3,303.92	3,445.26
11	Exceptional items - Gain on sale/fair value of investment in subsidiary										#1,684.79
12	Profit/(Loss) after tax	132.94	1,201.07	2,937.85	2,346.93	LO CO LO O	(1,673.16)	2,431.15	3,379.07	3,265.15	5,130.05
13	Net (loss) from discontinued operations		-		-	-	-	-	-	(2,330.73)
14	Net Profit / (Loss) for the year	132.94	1,201.07	2,937.85	2,346.93	LO CO LO O	(1,673.16)	2,431.15	3,379.07	##934.42	5,130.05
15	EPS ()	1.32	11.88	29.07	23.22	7.29	(11.04)	16.04	22.29	6.16	33.84
16	Interim Dividend paid ( per share)	-	3.00	-	-	-	1.25	-	-	-	-
17	Final Dividend paid / proposed ( per share)	2.50	1.00	4.00	4.00	2.50	0.75	3.00	3.00	1.20	*4.00

# The details of Gain on Sale of investment/fair value of investment in subsidiary has been given in the Note no.45 A of the financial statements (consolidated)

## Net Profit after tax for the previous financial year is post adjustment of loss on discontinued operations (due to technology obsolescence) as per Note No.40 of the financial statements (standalone).

* Proposed (Final dividend of 3/- per share and a special dividend of 1/- per share)

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS

The details of significant changes in key financial ratios for the year are comprehensively detailed in the Note No.43 of the Standalone Financial Statements. This note provides a thorough explanation for each change to help stakeholders for better understanding of the financial dynamics of the year.

DETAILS OF ANY CHANGE IN RETURN ON NET WORTH

Details of the change in Return on Net Worth are given in the Note No.43 of the Standalone Financial Statements.

MATERIAL DEVELOPMENTS IN THE HUMAN RESOURCES / INDUSTRIAL RELATIONS

Human Resources

Employees are our most vital and valuable assets. The Company has maintained a favourable work environment that fosters innovation and motivation. The Management is committed to investing in people through various Learning & Development initiatives, nurturing leadership and providing growth opportunities across all levels. As of March 31,2024, the company has a total of 279 permanent employees.

Welfare / Social Activities:

The Company sponsors various social welfare activities to enhance internal team-building cohesion. The "SWEES EMPLOYEES WELFARE TRUST" focuses primarily on the welfare of the employees. Additionally, the Company continuously focuses on Corporate Social Responsibility (CSR) activities, adhering to the guidelines prescribed by the Companies Act, 2013.

CAUTIONARY STATEMENT

Certain statements in this Management Discussion and Analysis Report, describing the companys future projections are "Forward-Looking Statements" under applicable laws and regulations. Actual results could differ materially from those projected due to several factors, including but not limited to economic conditions that impact demand/supply and price conditions in the domestic and international markets, changes in government regulations, tax laws, and other incidental factors.

	For and on behalf of the Board of Directors
	Sd/-	Sd/-
Place: Chennai	R. CHELLAPPAN	A. BALAN
Date: May 24, 2024	Managing Director	Joint Managing Director