Synergy Green Industries Ltd Management Discussions

FORWARD LOOKING STATEMENT

The report contains forward-looking statements, identified by words like ‘plans, ‘expects, ‘will, ‘anticipates,‘believes, ‘intends, ‘projects, ‘estimates and so on. All statements that address expectations or projections about the future, but not limited to the Companys strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements. Since these are based oncertain assumptions and expectations of future events, the Company cannot guarantee that these are accurate or will be realized. The Companys actual results, performance or achievements could thus differ from those projected in any forward-looking statements. The Company assumes no responsibility to publiclyamend, modify or revise any such statements on the basis of subsequent developments, information orevents. The Company disclaims any obligation to update these forward- looking statements, except as maybe required by law.

Global Wind Industry Overview:

Wind industry is in a pivotal moment with COP28 adoption of a target to triple renewable energy by 2030 and to accelerate the energy transition. Among policymakers and international institutions, there is a clear understanding that the world must accelerate installations of readily available technologies - namely wind and solar PV to move to a cleaner, modern and more flexible energy system.

Industry needs to accelerate wind energy installations from 117 GW in 2023 to at 320 GW of annual installations by 2030. This tripling of annual wind installations would bring around 3 TW of cumulative wind energy capacity by the end of the decade. It took over 40 years to reach the 1 TW mark and next 2 TW worldwide wind installations are being aimed with in 7 years.

So far, industry growth is powered by key markets like China, the EU, the US, India and Brazil. Other major economies also set up ambitious targets - particularly those with strong offshore resources - such as Japan, South Korea, Australia, Vietnam, the Philippines and Kenya.

Indian Wind Industry:

With Indias vision to become a ‘Developed Nation by 2047. India has introduced several strategic initiatives, such as: "Self- reliant India" through "Make-in India"; targeting 500 GW of renewable energy capacity by 2030, including 140 GW of wind; reaching net zero by 2070; and a ‘National Green Hydrogen Mission, among others. While thermal power continues to dominate the power generation mix, India is expected to more than double its onshore wind and solar PV capacity by 2028 and achieve its milestone of 50% non-fossil fuel generation before 2030.

Onshore wind is recovering from a growth slowdown Globally, India ranks fourth in total wind installations, with 46 GW of installed onshore wind as of March 2024. It is the second largest wind market in the Asia Pacific region after China. In 2023, due to a range of policy and institutional interventions by central and state governments, over 3.25 GW onshore wind capacity was commissioned - the highest annual installation level since 2017. GWEC expects continued recovery and has revised its onshore wind outlook for 2024-2028 to 22.8 GW. As per the National Electricity Plan of the central government for the period ending 2032, Indias installed wind capacity is estimated to amount to around 73 GW in 2026-27 and 122 GW in 2031-32.

Recent wind and hybrid tenders affirm that there is a pipeline of more than 13 GW of wind projects in India, as of September 2023. To advance the attainment of targeted volumes of annual wind and renewable auctions, the central government has provisioned administration of auctions by public sector undertakings (PSUs) such as NHPC, NTPC, Indian Railways, SJVN and PTC. State utilities have announced standalone wind, RTC, FDRE and hybrid auctions totaling 21 GW of capacity in 2023.

The step-up in wind demand will accelerate onshore wind growth, with following policy initiatives

a. 10 GW of annual onshore wind bids targeted from 2023-2027 through single stage/e-reverse auction bidding;

b. Inter-State Transmission System (ISTS) charges waiver up to June 2025

c. Wind specific renewable purchase obligations (RPOs) from 2023 to 2030

d. Announced firm and dispatchable renewable power supply tenders, as an upgraded version of the round-the-clock tender for renewable and storage projects

e. Mandated minimum share of renewable energy consumption for the electricity distribution licensees (DISCOMs) and the ability for consumers to purchase green electricity

f. Improvements in the timely disbursal of payments by DISCOMs

g. Transmission planning to integrate 48 GW onshore wind capacity by 2030

h. A revised ‘National Repowering & Life Extension Policy for Wind Power Projects - 2023 to facilitate repowering of wind turbines.

The Government of India has approved a viability gap funding (VGF) scheme worth Rs 7,453 crore ($890 million) to promote offshore wind energy projects. This scheme marks a crucial step towards harnessing the immense potential of offshore wind energy in India.

Another excellent year for global wind industry with highest ever installations of 117 GW during 2023 and posted a decent 50% growth over the last year. Two thirds of these installations are from China. This year India also did well at 3.25 GW installations with a growth of 62.5% over the previous year and highest installation post 2016-17.

As per GWEC forecasts wind installations growth momentum is projected to continue with 9.4% CAGR growth for next five years period. Indian installations are also likely to grow at faster pace with huge government initiatives in clearing the domestic hurdles along with improved competitiveness of turbines.

COMPANY & PERFORMANCE OVERVIEW:

Your Company mainly caters to the domestic & overseas requirements for wind turbine castings and established long term supply contracts with globally leading OEMs like Vestas, GE, Siemens Gamesa and Senvion. Other two leading OEMs operating in India like Nordex & Envision are also in the process of on boarding. All these OEMs demand includes domestic installations, Turbine assembly export and direct castings export.

Apart from wind OEMs, company established long-term contracts with leading wind gear box manufacturers like Flender Drives & ZF Wind. Company also caters to the non-wind customers like Terex in mining and Milacron for plastic injection castings.

In the financial year 2023-24, your Company recorded a net sale of Rs.328.13 Crores as against Rs.290.42 Crores in the previous year and thereby recorded an increase of 12.98% in the net sale. During the year Vestas revenue grown by 4% revenue and 148% growth in GE & Senvion combined together. However, wind business remains flat for the year because of 55% drop in Siemens Gamesa revenue due to slowdown in their execution. This years growth is contributed by Gear Box & Non wind segments.

During the year, absolute PBDIT stands at Rs 41.10 Crores as against Rs 26.76 Crores previous year and achieved a decent growth of 53.58%. Supported by stable raw material and revenue growth, PBDIT margins have improved from 9.22% to 12.53%. PAT jumps by 13 folds from Rs 0.87 Crores to Rs 11.56 Crores.

CAPEX Planning:

Foundry Capacity: Order book is expected to increase further in upcoming years with growth from existing customers and also addition of new customers like Nordex & Envision. Present 30,000 TPA foundry capacity is getting peaked with 80% utilization during FY 2023-24 and it is being planned to enhance the capacity up to 45,000 TPA with a brown filed expansion.

Machining Capacity: Presently entire machining activity is outsourced and 75% of our supplies are in machined condition. Present spend on machining is 10.4% of our revenues.

i. Majority of our machining vendors are located at Chennai, considering the south based OEMs like Vestas & Siemens Gamesa.

ii. During last few years business growth is happening with West/North based OEMs like Senvion, GE, Adani & Envision.

iii. We are also expanding the foundry capacity and need for machining the larger size turbine up to 5 MW is increasing.

iv. Local machining vendors are capable to handle up to 2 MW products.

This gives opportunity to establish in-house machining facility at Kolhapur to support increased business, optimize the logistic costs and also expand the margin. To start with 10,000 TPA machining facility is being planned to establish during FY 2024-25. These investments in machining are projected to contribute margin expansion to PBDIT up to 3%.

Captive Renewables: Presently we are connected with 8 MW of electricity. We are in the process of enhancing up to 12 MW for meeting the foundry expansion requirement.

i. Present spend on electricity is 8.2% of revenue and costing Rs 10.50/Unit consumption. Solar investments are projected to contribute over Rs 6/Unit of electricity generation at PBDIT levels.

ii. Considering present guidelines, it is feasible to input up to 70% of consumption through captive renewables.

iii. These investments will offer accelerated depreciation benefit and also hedge against future inflation on electricity

iv. These investments will help in approaching towards carbon neutral goal and improve the sustainability.

Considering above benefits, initially 2 MW solar project commissioned during FY 2023-24 and showing good results. Another 8 MW is being planned to invest during FY 2024-25. This 10 MW of renewable installation is estimated to support up to 14,000 TPA of production. These investments in renewables is projected to contribute margin expansion at PBDIT levels up to 2%.

Performance Outlook for FY 2024-25:

For F.Y. 2024-25 executable order book is projected to be around Rs 400 Crores and estimated a revenue growth of over 20%. During the year export revenues are projected to increase over 100% from 11.5% to 25%. Being a brownfield foundry expansion, small amount of production interruption is anticipated. It is also being targeted to materialize partial capacity expansion during fourth quarter production.

Assuming reasonably stable raw material movement, increase in projected revenue growth along with increase in export business share, PBDIT margins are estimated to expand during the year FY 2024-25 by 150 to 200 bps.

OPPORTUNITIES AND THREATS:

a) Opportunities

i. Indian wind market reverting to growth trajectory along with consistent global demand offers excellent growth opportunities.

ii. As India being converted as manufacturing Hub by MNC OEMs offers global demand for the local casting manufacturers.

iii. Trade wars/Global Sentiments favors Indian foundry demand from western buyers

iv. Presently entire machining is outsourced and with investments in In-house facility offers margin expansion

v. During last one year drastic reduction in renewable energy prices offers excellent return on investment and margin expansion opportunity.

b) Threats

i. 80% of our business is coming from wind industry (company facilities are generic for any large castings and can be used for any other industries)

ii. Volatile Commodity prices can impact profitability (Key commodities are hedged with customers on quarterly basis)

RISKS AND CONCERNS:

In accordance with the SEBI Listing Regulations, the Board of Directors of the Company is responsible for framing, implement- ing and monitoring the risk management plans of the Company. The Company does from time to time identify risks associated, assess its impact and take appropriate corrective steps to minimize the risks that may threaten the existence of the Company.

Annual risk assessment exercise is conducted in the line with the framework, existing risks, their mitigation plans are evaluated and new risks, if any, are identified. The Audit Committee has additional oversight over financial risks and controls. It also re- viewed the mitigating factor and actions initiated by the management to minimize the impact.

Risk Mitigation

To mitigate various risks significant to its business, your Company took several strategic initiatives during the year, such as:

• To mitigate risk of limited customer base the Company has developed castings for new customers like Senvion India Pvt. Ltd., GE India etc.

• To mitigate exchange fluctuation risk Company has availed Term Loan in Foreign Currency (FCTL) and also entered into currency swap arrangement which will ensure natural hedge against export.

• Focused efforts are taken to develop alternative sources for its critical raw material supplies i.e. Pig Iron and CRCA Scrap etc.

These initiatives have helped minimize the impact of uncertainties and helped the Company to achieve its planned business objectives during the year.

SEGMENT WISE OR PRODUCT WISE PERFORMANCE:

The Company works only in one segment i.e. manufacturing of SG & CI Castings.

IN ACCORDANCE WITH THE SEBI (LISTING OBLIGATIONS AND DISCLOSURE REQUIREMENTS 2018) (AMENDMENT) REGULATIONS, 2018, THE COMPANY IS REQUIRED TO GIVE DETAILS OF SIGNIFICANT CHANGES (CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS:

	Key Financial Ratios	2024	2023	Remark
1	Debtors Turnover	11.52	10.64	No material change
2	Inventory Turnover	5.46	4.68	No material change
3	Current Ratio	0.92	1.01	No material change
4	Debt Equity Ratio	1.71	2.38	Debts are reduced due to repayment. Shareholder equity is increase due to profits in F.Y.23-24.
5	Interest Coverage Ratio	3.20	1.06	Cashflow available to pay debts is increased due to higher profits in current year.
6	Operating Profit Margin (%)	9.11	5.10	Compare to last year, in F.Y.23-24 there is reduction in input prices and increase in Sales which leads to increase in Operating Profit, Net Profit and Net worth of the Company.
7	Net Profit Margin (%)	3.55	0.30
8	Return on Net Worth (%)	24.76	2.47

MATERIAL DEVELOPMENTS IN HUMAN RESOURCES, INCLUDING NUMBER OF PEOPLE EMPLOYED:

The Company believes and recognizes that its employees are important resource in its growth and to give competitive advantage in the present business scenario. Ensuring business operations, employee safety and welfare became the foremost concerns for the Company.

During the year under review, the company ensured to keep the safety and the wellbeing of its employees as its topmost pri- orities. The Company has total 203 employees as on March 31, 2024. The company continued with its focus on an efficiently recruiting employees with the right talent and groom them to build a strong leadership pipeline. The diversity and inclusiveness in the workforce remained a strong fundamental to the company, in line with it the company continued to bring in more women employees.

The Company has well-thought out and employee-friendly HR policies which it has led to a positive working relationship with its employees. The Company has not had any work stoppages or cessations owing to labour disputes. The Company continues to lay great emphasis on Safety and Security. To ensure adherence to safety protocols, the company follows stringent procedures to safeguard and protect its workforce. The company also keeps prescribing policies and procedures while imparting training to its workforce. It has a system in place that promotes a positive work environment free of all forms of harassment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has in place a well-framed internal control system that authorizes, records, and reports transactions to safeguard assets and protect against loss from unauthorized use or disposition. The internal controls ensure the reliability of data and fi- nancial information to maintain accountability of assets. These internal controls are supplemented by extensive internal audits, management review, and documented policies, guidelines, and procedures.

DISCLOSURE OF ACCOUNTING TREATMENT

For the first time Indian Accounting Standard was applicable from the F.Y.2021-22 due to migration from BSE-SME Exchange to the Mian Board of BSE & NSE. The Company has adopted and has followed all the treatments in the Financial Statements as per the prescribed Indian Accounting Standards.

Note:

For sake of brevity the items covered in Boards Report are not repeated in the Management Discussion and Analysis Report. Cautionary Statement:

Certain Statements in the Management Discussion and Analysis describing the companys objectives, projections, estimates and expectation or predictions may be forward looking statements within the meaning of applicable laws and regulations. It cannot be guaranteed that these assumptions and expectations are accurate or will be realized. Actual results could differ 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 markets, changes in the Government Regulations, tax laws and other statues and incidental factors.