Symphony Ltd Management Discussions

The global economy entered 2024 facing headwinds that dampened the initial optimism of a post-pandemic recovery.

After a strong rebound in 2021, growth projections for 2023 were revised downwards by major institutions like the IMF and OECD, settling around a sluggish 3%. This slowdown can be attributed to several interconnected factors.

Geopolitical tensions have significantly disrupted global supply chains. The war has caused a surge in energy and commodity prices, pushing inflation to multidecade highs in many countries. This inflationary pressure has forced central banks to raise interest rates, a move that aims to curb inflation but also has the side effect of dampening economic activity.

The uneven recovery from the COVID-19 pandemic further complicates the picture. Developed economies, with their stronger social safety nets and financial resources, have generally shown more resilience. However, many developing economies continue to grapple with high debt levels and limited resources to address ongoing challenges. This disparity in recovery rates widens the gap between developed and developing nations.

Looking forward, the global economic outlook for 2024 remains uncertain. While there are signs that inflation may be easing in some regions, geopolitical risks and ongoing supply chain disruptions continue to pose significant headwinds.

The trajectory of the global economy will largely depend on how effectively these issues are managed by governments and central banks. Additionally, fostering international cooperation on issues like trade and climate change will be crucial in navigating these choppy economic waters.

Furthermore, the path to a sustainable and inclusive recovery requires addressing longstanding vulnerabilities. Investing in infrastructure, promoting innovation, and ensuring equitable access to education and healthcare will be critical in building resilience for future challenges. As the global economy navigates these complexities, a focus on long-term growth strategies alongside short-term solutions will be key to securing a brighter economic future.

Indian economy overview

Indias economy presents a complex picture, marked by impressive growth rates alongside significant challenges. Despite the global slowdown in 2023, India emerged as a relative bright spot, with Real GDP growth rate of 8.2% in FY 2023-24. The Indian economy stands out amidst a sluggish global landscape, propelled by several positive tailwinds, making the nation an attractive destination for investment and trade.

Burgeoning domestic demand:

With a young and growing population, the demand for goods and services is on the rise. This fuels various sectors, from retail and consumer durables to real estate and construction. Furthermore, a growing middle class with rising disposable incomes is poised to contribute significantly to domestic consumption in the coming years.

Governments push for infrastructure development:

Large-scale investments in roads, railways, ports, and digital infrastructure are creating a more efficient and connected economy.

This improved infrastructure not only reduces transportation costs but also unlocks new economic opportunities across different regions. Additionally, government initiatives like "Make in India" are attracting foreign direct investment (FDI) and fostering domestic manufacturing growth.

Rising Investment: Investment activity, both domestic and foreign, is showing positive signs. The governments focus on infrastructure development, coupled with initiatives to improve the ease of doing business, is attracting foreign direct investment (FDI). Additionally, a growing domestic savings pool is leading to increased investments from local institutions and individuals.

Demographic dividend: India boasts a young population, with a median age of around 28 years. With a large working-age population, India has a vast pool of skilled and unskilled labour.

This not only caters to domestic needs but also positions India as a competitive player in the global services sector. The IT and IT- enabled services (ITeS) industry, a major contributor to Indias GDP, is a prime example of this advantage.

Digital revolution: The rapid growth of internet penetration and smartphone adoption is driving e-commerce, digital payments and the creation of a vibrant startup ecosystem. This digital transformation is not only fostering innovation but also improving financial inclusion and access to information and services for a wider population segment.

Favourable geopolitical landscape: While global uncertainties exist, Indias strategic position offers some advantages. The country is increasingly seen as a reliable alternative to China in terms of manufacturing and sourcing. This could lead to increased trade opportunities and foreign investment in specific sectors.

However, its important to acknowledge that these tailwinds need to be harnessed effectively to ensure sustainable and inclusive growth. In addition, these tailwinds are accompanied by headwinds like rising inflation and global economic uncertainty. Managing these challenges effectively will be crucial for India to sustain its economic momentum and translate its growth potential into long-term prosperity for all.

Overview of the Indian air coolers market

The Indian air coolers market was valued at USD 500 million+ in 2023 and is likely to double over the next five to seven years, driven by factors such as rising temperatures, increased electricity access, technological advancements, rising income levels and an improved distribution network.

The eco-friendly nature of air coolers and consumer concerns about energy consumption in air conditioners further contribute to market expansion. Air coolers dont use harmful cooling agents, making them environment- friendly. Additionally, the growing demand for air coolers in regions with dry climates and across residential and commercial spaces with adequate ventilation is a significant factor fueling market growth. The rise of online sales channels and ongoing technological advancements present lucrative growth prospects for the Indian air cooler market.

Air cooler demand in India hinges largely on the hot climate prevalent across most regions.

With extended summer seasons, typically from February to July, temperatures often soar to 45?C, driving significant demand.

Air coolers offer a more cost- effective solution for consumers as their operational costs and electricity consumption are significantly lower compared to air conditioners. Efforts to enhance electricity access in remote areas, along with rural development initiatives, are anticipated to boost the demand for air coolers across the nation.

In Indias 300+ million households, a substantial percentage relies on fans and air coolers in the summer. Air coolers, known for energy efficiency and eco-friendliness, represent one of the fastest- growing segments in consumer durables, widely accepted across the consumer appliances arena.

Air coolers provide excellent air quality, maintain optimal humidity levels, and avoid the use of harmful cooling agents like CFC and HFC. Air coolers offer a cost-effective alternative, boasting an impressive 90% reduction in electricity consumption compared to air conditioners. Government reforms for rural development, increased urbanisation, discretionary spending, and revised industrial norms, coupled with upcoming residential projects, are set to boost the demand for air coolers in India. Tower and personal air coolers are expected to gain market share due to evolving consumer preferences, growing e-commerce sales, and the proliferation of brand variants and SKUs.

Growth drivers

Rising temperatures: The annual mean global nearsurface temperature for each year between 2023 and 2027 is predicted to be between 1.1?C and 1.8?C higher than the 1850-1900 average. Arctic warming is disproportionately high. Compared to the 1991-2020 average, the temperature anomaly is predicted to be more than three times as large as the global mean anomaly when averaging over the next five extended winters in the Northern Hemisphere.

Economy growth: As the fifth largest economy in the world, India boasts a formidable GDP of ~ USD 3.73 trillion in 2023.

This further results into increased consumer spending power, which will drive the demand for indoor comfort solutions such as air coolers.

Millennials: People under the age of 25 constitute over 50% of Indias population. The median age in India is 28, while it is 38 in the United States and 39 in China. With the largest youth cohort, Indias 254 million individuals aged 15-24 could serve as a wellspring of innovation, fresh perspectives and enduring solutions.

Rapid urbanisation: By 2035, ~43% of the population is expected to live in urban areas by 2035 (v/s ~35% in 2020) driving the demand in the air-cooler market.

Non-metro markets: In the past few decades, non-metropolitan cities have experienced rapid consumption growth, positioning them as emerging economic centres with promising prospects.

Digital inclusion: Indias e-commerce market is estimated at USD 92.95 billion in 2023, with an anticipated growth to USD 246.10 billion by 2028, at a CAGR of 21.50%. The expansion is driven by increasing urbanisation, rising internet penetration, and a projected 1.5 billion internet users by 2040.

Rural advancement: The government has bolstered electricity infrastructure nationwide, reaching both urban centres and rural areas in India.

This has, in turn, catalysed a significant upswing in the market for electrical appliances.

Labour force: Indias working- age population (20-59 years) is projected to constitute 59% of the total population by 2041, driving growth in the air cooler segment.

Technological innovations:

Modern technological features like smart locks, touch-sensitive digital panels, remote controls, auto swings, alarms and other advanced attributes are widely preferred over outdated products in the unorganised segment, by creating tactical demand shift towards organised segment.

Limited adoption: Indias consumer durables market, which is less saturated than other nations, presents significant growth potential. Besides, formerly deemed luxuries and electronic items are evolving into essential commodities.

Modern retail: Organised retailers have expanded into tier II, III and IV cities, enhancing their visibility.

Financial overview

The Companys consolidated revenue from operations stood at H 1,156 crores in FY 2023-24, compared to H 1,188 crores in FY 2022-23. The consolidated

EBITDA of the Company (excluding exceptional items and other income) stood at H170 crores in FY 2023-24, compared to H138 crores in the previous year. The Company registered a consolidated PAT of H148 crores in FY 2023-24 compared to H116 crores in FY 2022-23.

Please refer to Note no. 47 of the Standalone Financial Statements.

Information technology

This year marked a significant step forward in the Companys digital transformation journey.

This year, the Company shifted its focus towards user adoption and process efficiency improvements. The Company implemented a robust user adoption monitoring process that utilises regular user feedback, plotted matrices, and utilisation measurements. This data-driven approach allows the Company to identify areas needing improvement and tailor solutions for optimal user experience.

Customer journey takes centre stage:

Understanding the customers journey is paramount. To this end, the Company implemented distributor and dealer portals featuring enrolment and order management functionalities. These portals streamline the customer experience and provide much- needed transparency throughout the sales process. Additionally, the Company introduced a digital extended warranty program, further enhancing customer satisfaction.

Automation streamlines internal processes:

Significant progress was made in automating internal processes. Manual tasks associated with incentives, price calculations, and Sales and Operations Planning (SNOP) have been automated, resulting in substantial savings in human resources.

Product traceability:

Product end-to-end traceability has been identified as a key area for improvement. The Company addressed this challenge by introducing handheld devices across all manufacturing and warehousing facilities. This initiative will ensure accuracy in product serial number tracking and minimise potential revenue leakage within the service function.

Information security strengthened:

While driving digital transformation, the Company remains steadfast in its commitment to information security. The Company has implemented a comprehensive security posture and undergone an ISO 27001 audit. This ensures that information security risks are identified, quantified, and mitigated, safeguarding the Companys valuable data assets.

By prioritizing user adoption, customer experience, and internal process efficiency through digital transformation, coupled with a strong focus on information security, the Company is well- positioned for continued success in the years to come.

Human resource management

As of March 31,2024, the Companys global workforce, including subsidiaries abroad, was 605. Grounded in the principle that employees are the most valuable asset, human resources strategy adopts a holistic approach to cultivating a positive work environment. The Company prioritises employee well-being, growth, and satisfaction through initiatives such as aspirational goal setting and continuous improvement. The Companys commitment to personal and professional development not only benefits individual employees but also contributes to the Companys overall organisational success. Additionally, the Company invests in comprehensive initiatives to promote the physical and mental well-being of its workforce, aligning its corporate responsibility efforts with social impact initiatives.

The Company prioritises people capability building through talent management initiatives.

Its digitalisation efforts span the entire employee life-cycle, enhancing efficiency and accessibility. The Company fosters a culture of mentorship to assimilate new talent, exemplified by programs like Aarambh, induction initiative. Further, the Companys outcome-centric learning programs and continuous reward and recognition initiatives underscore its commitment to employee growth and engagement. Through structured employee engagement programs, the Company ensures the well being of its workforce, reflecting its dedication to creating a workplace where employees can thrive personally and professionally.

Internal control systems and their adequacy

The Company has a proper adequate system of internal controls in place, to ensure that all assets are safeguarded and protected against loss from unauthorised use or disposal, and that transactions are authorised, recorded and reported correctly. The Company issues and updates documented operating procedures and authorities with adequate controls defined. Internal control is supplemented by an extensive program of internal and external audits, and periodic reviews by the management. The system is designed to adequately ensure that financial and other records are reliable for preparing financial information and other data, and for maintaining accountability of assets. Further, the Company periodically monitors Information and Technology General Controls (ITGC). The compliance function reviews the Companys adherence to regulatory and legal requirements providing timely feedback to the management for corrective action, including minimizing the design risk, if any. The Audit Committee of the Board also reviews the performance of the audit and compliance functions and reviews the effectiveness of controls and compliance with regulatory guidelines. In the opinion of the Board of Directors and senior management, internal control systems are well placed and working in an efficient manner.

Cautionary statement

The Management Discussion and Analysis report containing your Companys objectives, projections, estimates, and expectations may constitute certain statements which are forward-looking within the meaning of applicable laws and regulations. The statements therein could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operation include weather behavior, raw material availability and prices, cyclical demand, pricing in the Companys principal markets, changes in the governmental regulations, tax regimes, forex markets, and economic developments within India and in the countries with which the Company conducts business, and other incidental factors.