tata chemicals ltd Management discussions

I. Operations

Sales trend of Basic Chemistry Products is as follows:

TCNA Sales Volume in lakh MT

In FY 2022-23, sales volumes decreased by 2% as compared to FY 2021-22. Demand for soda ash has fully recovered from the decline seen in previous years due to the COVID pandemic. Internally, efforts will continue to improve manufacturing efficiency, supported by improved operational efficiencies, and capital improvements to alleviate bottlenecks and minimise unplanned shutdowns, with a particular emphasis on controlling energy consumption to mitigate recent increases in energy costs, and improve electrical power management as the US continues to experience significant inflationary pressures.

The revenue increase is mainly driven by an increase in prices.

Tata Chemicals Europe Group Limited, UK (TCE Group)

I. Operations

Sales trend of Basic Chemistry Products is as follows:

TCE Group Sales Volume in lakh MT

TCE catered to 50% of the UK market demand of soda ash from its manufacturing operations at Lostock. All input costs rose strongly, particularly in the second half of the year. The Company, by engaging with its customers was able to secure mid-year price increases to cope with these unprecedented cost pressures.

In FY 2022-23, salt volumes decreased by 10% as compared to FY 2021-22. Strong revenue growth in FY 2022-23 was due to the price increase during the year to cover increased energy costs. Gas prices remained volatile throughout FY 2022-23, with decline towards Q4. Capping of energy prices in Europe may stabilise energy markets. However, there remain a significant number of uncertainties as 2023 unfolds quarter by quarter.

The UK sodium bicarbonate business had a good year, including the full commissioning of the new CCU plant which is now providing the European Industrial Gases Association (EIGA) standard CO2 required for high grade sodium bicarbonate production, and has also reduced emissions by over 10% in the process.

The revenue grew 35% compared to the previous year, led by higher soda ash, salt and sodium bicarbonate revenue.

I. Operations

Sales trend of Basic Chemistry Products is as follows:

Soda ash is the key product in the TCML portfolio, mainly servicing the container glass and silicate sectors in the East African domestic market, and the export markets in SEA and the Indian subcontinent.

The revenue increased by 64% compared to the previous year, on account of better realisations due to favourable market demand. Hence, PAT improved by Rs.356 crore. A tight control on costs, especially lowering of fixed cost, coupled with higher realisations resulted in better EBITDA.

I. Operations:

Note: Excluding inter-company transactions Rallis registered Rs.2,967 crore during FY 2022-23 compared with Rs.2,602 crore recorded in the previous year in a challenging business environment. Rallis was able to take calibrated price increases to the domestic customers, in order to absorb the input costs, by leveraging its strong brands. International markets had high price opening inventory issues and pressure on prices due to drop in raw material prices in the latter part of the year, resulting in Profit After Tax of Rs.92 crore compared to Rs.164 crore achieved during FY 2021-22

Note: The figures are as per TCLs consolidated books

The revenue grew 14% compared to the previous year on account of growth in Crop Care. Crop Nutrition business registered 21.8% growth over the previous year. Growth in Crop Care business was positive at 16.3%, though margins were under pressure due to steep cost volatility. Seeds business had a challenging year, resulting in degrowth of 1.3%, impacted by both internal and external factors. Optimising the fixed costs and net working capital are key priorities going forward.

5. Business Outlook

The Company continues to focus on growth of its core businesses and develop new products that serve customers needs along the vectors of sustainability and green chemistry. The demand growth is in sustainability driven applications like solar glass, lithium carbonate and shift from plastic to glass containers, and also in sectors such as food, feed and pharma. These, in turn, will continue to drive the Companys current and future investments as an ingredients supplier of choice to these sectors.

Global demand growth for FY 2022-23 saw strong demand across all sectors, continuing the post COVID-19 economic recovery which began mid 2021. There will be a new capacity of 1 million tonne coming online in the US in 2023 and 1.5 to 2 million tonnes in China by year end. This may put pressure on prices for FY 2023-24 supply period.

In India, recovery in soda ash demand across application sectors, an anticipated reduction in imports, and increasing energy and freight costs will necessitate increased focus on operating rates and the ongoing programmes for driving cost reductions and efficiencies, which are likely to yield benefits in margins. Timely completion of phase 1 expansion under execution, and projected phase 2 expansion at Mithapur will further drive growth across the Companys product portfolio in its core business.

A key focus area will be continuing push on expanding value-added sodium bicarbonate sales into the growing food, feed and pharma sectors, in line with the Companys transformation strategy, and offering customers in these sectors a portfolio of products, including its NQ range of prebiotics. This would also further ramp up capacity utilisation of the new prebiotics plant. Similarly, the ongoing project to increase salt capacity in order to service long-term growth in demand from the key customer, TCPL, will continue.

Sustainability driven trends in the rubber and tyre industry are calling for incorporation of specialty grades of silica, which augurs well for the growth of the specialty silica business in terms of customer acquisition and capacity growth.

The outlook for TCNA, US, remains positive, with soda ash operating rates at maximum levels driven by a continued ongoing recovery in export markets. At TCNA, continuous improvement, cost reduction and sustainability in operations will remain areas of focus to drive margin improvement. Generating free cash flow and prepaying debt remains a key area of focus.

I n TCE, UK, product demand across the range has built strongly throughout the year from a slightly hesitant start, with price rises occurring on the back of the significantly increasing input price pressures. The sodium bicarbonate plant is now self-sufficient in carbon dioxide, having successfully commissioned the CCU plant as part of the Companys overall sustainability push towards its carbon reduction targets. Future sodium bicarbonate and salt growth is being driven by focus and investment in high grade pharmaceutical applications, including investment in a pharma salt plant at the Middlewich site, due onstream in 2024.

For TCML, Kenya, sustained demand in export markets with a focus on developing the domestic East African market to maximise overall price realisation through strategic market mix, would be an area of focus. In addition, ensuring plant reliability as well as optimising costs would continue to be

key result areas. Generating free cash flow and prepaying debt remains a critical area of focus.

For Rallis, manufacturing capacity and introduction of new products will provide a growth platform for both exports business and domestic sales. Rallis is augmenting its product portfolio through co-marketing and in- house research & development (R&D). Manufacturing capacity is being augmented, marketing activities are being intensified and distribution networks are being strengthened in key states. Seeds business will address challenges to stabilise operations in FY 2023-24.

6. Risks and Opportunities India

Higher energy costs due to higher coal and fuel costs is a significant risk to the Companys business performance. Other risks include pricing risk on account of capacity additions in US & China, higher inflation and recessionary pressure (both global and domestic) leading to demand slowdown, currency devaluation, and changes in the exportsectororimports from global markets. The Company continues to remain focussed on keeping the costs low, including variable costs like fuel, salt and limestone through raw material securitisation, and continuous improvement programmes to help mitigate the adverse impact of these risks such as diversifying energy sourcing in addition to current sources to improve sourcing flexibility, working on changing fuel mix, maximising use of alternate energy sources, different contracting strategies and continuing with strategies like commodity hedging/advance fixing of prices.

Execution of expansion project, adherence to more stringent environmental norms, packaging and improving safety performance in a sustainable manner are other key areas that the Company continues to focus on during FY 2023-24.

El Nino effect on weather and monsoon, and supply chain disruptions due to rake availability etc. are some other risks which need to be considered. Excessive rains are resulting in dilution of brine, which is affecting captive solar salt availability, leading to rise in cost of production as there is an increased need to purchase salt. The Company is enhancing production capacity of salt through joint development projects with TCPL, including working with TCPLon logistics options to maximise movements. Changes in monsoon pattern may also have adverse effect on the agrochemicals demand.

Carbon emissions taxation will impact the cost of production. The Company is developing a holistic carbon abatement strategy at a corporate level, which will help in mitigating this risk.

In Bicarb, capacity addition by competition and the Company itself may lead to temporary oversupply. Threat of substitution from sodium sulphate in animal feed, which is a cheaper variant, also needs to be considered. Bicarb use in the flue gas segment continues to be a promising opportunity, but there still remains uncertainty in consistent off-take by power plants. The Company had started supplies in FY 2020-21, and expects the engagement to continue as the regulations are implemented.

The Governments push towards renewables will accelerate consumption of various products in India in a significant manner. Its focus on Atmanirbhar Bharat opens up opportunities in terms of kick-up of demand from infrastructure development, boost to domestic manufacturing through several initiatives like PLIs, import restriction measures, and softer finance facilities. This will have a positive impact on soda ash, bicarb and cement consumption, either directly orth rough increase in demand of the end segments.

Coming to silica, delay in product approval from major tyre and non-tyre customers will negatively impact the plant utilisation rates. Both R&D and business development teams are engaging with critical customers on a constant basis to fast track product approvals and increase commercial sales. The Companys FIDS (Highly Dispersible Silica) has gained approval among large tyre manufacturers like CEAT, with whom TCL is working closely to scale in the high margin business. The Company is working towards reducing the variable cost of production of silica through local sourcing of low-cost raw materials, and enhancing plant efficiencies through better process control.

In FOS, lower sales off-take are resulting in low plant utilisation. Margin erosion can happen due to escalating raw material costs, primarily sugar and rice husk, and softening of selling prices of FOS. However, the favourable regulatory landscape of certain countries will work as a growth lever, to open more territories where FOS can be sold. The Company is using data from third party data aggregators to directly target the existing users of FOS. This can help the Company in achieving quicker conversions. GRAS (Generally Recognised as Safe), Halal & Kosher certifications for FOS from a fungus called Aspergillus Niger can open additional markets for the Company.

In addition to enhanced ease of doing business, customer partnerships around themes of innovation and sustainability continue to offer opportunities for stronger customer connect. Increasing value-added products and sustainable supply chain practices like bulk material are some steps the Company will continue to focus on.

Using technology for digitalisation of the plants, and making processes smoother for customers and internal stakeholders is going to be crucial as the Company heads into a digital age. Multiple projects around plant and supply chain automation, as well as customer relationship managementare being implemented.

Rallis has a robust and comprehensive framework to address the vagaries of monsoon and its impact on Indias agriculture sector through deeper engagement with farmers. In addition, the steep increase in input costs is being addressed through combination of localisation of intermediates, and appropriate engagement and contracting with suppliers. Increased domestic usage of agrochemicals and exports out of India are immediate opportunities. The long-term trend of shift to biologies remains an area of product development focus.

Overseas

TCNA, US is well prepared to address the short-term export risks subsequent to the exit from the American National Soda Ash Corporation (ANSAC) in December 2022. ANSAC exit allows the Company to drive direct customer engagement and to better align the strategic goals of the business with the market.

Adherence to more stringent environmental and regulatory norms, and sustainably improving safety performance are other key issues for the business. A focus on these initiatives, including investmentand resource prioritisation, form a mitigation strategy to systematically address them.

TCE, UK continues to address the inflationary environment and higher energy costs with a focus on reduction of fixed costs and customer engagement.TCE UK continues to work on growth opportunities of Ekokarb? in the global market and leverage the new warehouse to enhance customer experience and quality.The proposed pharma salt project will give a boost to offering premium grade products to customers.

In Kenya, the focus is largely on quality and capacity utilisation. To maintain a niche in the container glass and silicate sector, the quality of soda ash needs to be maintained, which remains a challenge. This shall be mitigated with stringent quality controls. Energy saving through solar power and innovation shall continue to help reduce the cost of production, which is critical in helping the Kenya operations remain favourable on cost leadership.

Inventories are higher primarily due to higher prices on inventory of raw materials and coal.

Trade receivables are higher primarily due to the higher sales during the year.

*inter-corporate deposits made during the year Decrease in other financial assets is mainly due to reduction in subsidy receivables. Decrease in other assets is mainly due to settlement of advances given and reduction in statutory receivables.

Lower cash and cash equivalents have been represented through higher outflow in corporate deposits.

Increase in trade payables is mainly due to higher cost of raw materials reflected through an overall increase in the cost base.

Net cash flow from operating activities: Higher operating cash flow in FY 2022-23 against FY 2021-22 is mainly on account of change in working capital.

Net cash flow from investing activities: Higher investing cash outflow in FY 2022-23 is mainly on account of redemption of current investments compensated by higher purchase of property, plant and equipment (including capital work-in-progress).

Net cash flow from financing activities: Higher cash outflow in FY 2022-23 is mainly on account of dividend paid.

(D) Details of significant changes in key Standalone financial ratios:

Debt Equity Ratio (times) of the Company has improved due to increase in equity (on account of profits earned during the year), while debt continued to remain almost negligible during the year.

(E) Consolidated performance for the year ended March 31,2023:

The increase in cost of materials reflects higher raw material costs across units. In case of TCNA and TCML, raw materials are primarily mined and do not involve external purchases and are hence not reflected in cost of materials consumed.

Power and fuel costs have increased on account of higher coal and gas prices across units.

Employee costs increased due to increments in TCL, TCE, TCNA and Rallis.

Freight and forwarding charges have increased primarily due to increase in fuel cost over the period in TCL,TCNA, TCE andTCML.

* Others include insurance charges, professional fees, foreign exchange loss, travelling expense, provision for doubtful debts and advances, directors fees / commission, subcontracting cost, outsourcing cost and other expenses.

1. Interest Coverage Ratio (times) has increased to 7.75 (FY 2021-22: 5.79) due to increase in revenue from operations and earnings before interestand tax across geography.

2. Current Ratio (times) has increased to 1.66 (FY 2021-22: 1.23) mainly due to decrease in current borrowing and lease liabilities to Rs. 619 crore (FY 2021-22: Rs. 3,164 crore)

3. Net Profit Margin (%) has increased to 14.70% (FY 2021-22:11.18%) due to increase in revenue and profit from operations across geography.

4. Return on Net Worth (%) has increased to 12.23% (FY 2021-22: 8.19%) due to increase in revenue and profit from operations across geography.

Notes:

1. Gross debt of Rs. 6,296 crore includes Rs. 325 crore of working capital loans/short-term borrowings.

2. The repayment schedule for term loans has been prepared considering the existing repayment terms. Some of these loans/ facilities may be refinanced / pre-paid, in full or in part, from time to time in future depending on the requirement and the business plans. Non-current portion of finance leases has been included in FY 2024- 25 repayment.

8. Innovation and Technology Innovation Centre

The Innovation Centre (1C) at Pune is the Companys science and technology hub for seeding new businesses and accelerating the Companys sustainable long-term growth. 1C supports the Companys businesses by providing cutting-edge technology solutions, and a customer centric, multi-disciplinary problem-solving approach for sustainable growth and differentiation. The Company has filed 199 patent applications (cumulative) with 133 patent grants.

During the year, 1C made significant contributions to the development of green highly dispersible silica (HDS), functional silica and environment-friendly process for bio-based surfactants, increased yield of bioactives in medicinal plants through Aeroponics. 1C also developed new FOS variants and co-created innovative applications of FOS with customers. The Company won the prestigious Clls Indias top 50 Innovative Company Award and Top Innovative Company (Large) in Manufacturing (category winner).The Company received special appreciation award for its Intellectual Property (IP) practices and portfolio from Cll as well.

9. Digitalisation and Information Technology

The Company is currently undertaking a project to modernise its Enterprise Resource Planning (ERP) system, with a focus on Business Process Re-engineering (BPR). The Company aims to migrate from SAP ECC6 to S/4HANA to streamline processes across all geographies, establish best practices, and improve operational efficiency. TCLs Industry 4.0 agenda includes enhancing its Industrial lloT applications, with a particular focus on areas such as the Carbonation Towers located in its Mithapur plant, India. Additionally, TCL is developing and testing lloT applications for its MUW plant for salt, with the goal of increasing efficiency and improving yield.

To address the issue of unplanned downtime for critical equipment, TCL is developing a predictive analytics application that predicts Induced Draught (ID) fans and C02 pumps. The Company has also introduced a video analytics solution to improve bag counting accuracy and remotely monitor solar salt pan intake pump operations. TCL has also introduced e-logbooks to digitalise its data capture system. In addition to the above, the Company plans to implement a spends analytics solution to improve visibility, mitigate risks,analyse historical data, and identify savings opportunities.

TCLs IT and digital transformation strategy is regularly reviewed and revised to align with industry trends and business requirements, with digital initiatives being adopted across all functions. TCL has implemented a Transportation Management System (TMS) for Tata Chemicals and Rallis to improve collaboration with transporters and logistics management. Additionally, the Company has implemented Robotic Process Automation (RPA) for selected finance processes to enhance productivity. To ensure compliance with labour regulations, TCL has implemented a contractor management system. The Company also plans to introduce digital dashboards forall Key Performance Indicators (KPIs) to democratise the usage of data and analytics.

TCL recognises the importance of cybersecurity in safeguarding its operations as it journeys towards digitisation. To enhance manageability, scalability, and agility, TCL is upgrading its on-premises IT infrastructure and adopting cloud technology. Moreover, the Company has upgraded its email, office applications and collaboration systems to a more advanced platform that provides better user experience and enhanced cybersecurity.

TCLs subsidiary, Rallis, continues to embrace digital and analytics solutions to enable agility and excellence in business operations. For instance, Rallis is implementing

SeedSay, a seed demand forecast system based on advanced analytics, to optimise seed placement in shops and reduce sales returns. Moreover, Rallis is using DRISHTI, a state-of-the-art decision intelligence system that harnesses the power of Spaceborne Remote Sensing and Artificial Intelligence, to monitor hybrid seed production farms. Rallis has been awarded the CII-DXaward underthe Most Innovative category for leveraging DRISHTI.

In conclusion,TCLs new initiatives are aimed at improving operational efficiency, performance and decision-making. The Company is committed to staying ahead of the curve by incorporating the latest technologies and digital solutions to achieve its goals.

10. Human Resources

The steady engagement of its people has enabled the Company to achieve its key objectives in FY 2022-23. Various changes in technology were embraced and the employees are working towards achieving the next level of excellence by focussing on their skill development and innovative practices.

In line with its commitment to increase diversity in the workforce, the Company has increased the hiring of women across all its plants. Graduate engineertrainees were hired in order to build a pipeline of engineers for production units with an intake of 50% women engineers. The Companys manufacturing sites today have women in all the three shifts in India.

During the year, the Company continued to build future capability interventions based on future ready and"future engaged"competencies.The Companys rich digital learning platforms like Global Gyan, Tata Tomorrow University and Linkedln Learning enabled continuous learning and upskilling to its people. Structured interventions like INVEST helped build the managerial capability. Plants continued their functional capability programmes, supplemented by centrally run virtual trainings on POSH (Prevention of Sexual Harassment), ABAC (Anti-Bribery & Anti-Corruption), Ethics, D&l (Diversity & Inclusion), etc.

The Companys new my WOW (My World of Work) HRMS (Human Resources Management System) Oracle platform underthe OTON (OneTata Operating Network) programme is being well adopted by its people. This migration has helped increase the efficiency of the people processes, and also helped address the needs and aspirations of the emerging multigenerational workforce.

The Companys Employee Assistance ProgrammeWe Care supported India-based employees and their families in building psychological, physical, emotional and financial wellness to help them cope with stressful times.

Frequent communication by leaders, town halls and team connects, rewards & recognition, advisories and policy/process changes were in place to keep the employees engaged and motivated.

The details of number of the employees as on March 31, 2023 are given on page no. 76 of this Integrated Annual Report.

11. Safety and Health

Health and safety continues to be one of the most important values atTCL.The Company has a comprehensive approach to ensure that all employees, associates, assets and the environment are protected from harm to achieveTarget Zero Harm. It has adopted a proactive approach to health and safety management, which includes creating policies and procedures to promote safe working practices and providing appropriate training to employees. Additionally, the Company is also ensuring that it has the right systems in place to monitor performance and identify potential risks before they become an issue. By taking these steps, TCL ensures that its commitment to Target Zero Harm is met.

The Company has a Board-level Safety, Health, Environment and Sustainability (SHES) Committee, chaired by an Independent Director. The Committee reviews and monitors the sustainability, safety, health and environmental policies and activities of theTata Chemicals Group on behalf of the Board to ensure that the Group is following appropriate laws and legislation.This Committee also provides valuable direction and guidance to the Management to ensure that safety and sustainability implications are duly addressed in all new strategic initiatives, budgets, audit actions and improvement plans.

The Company hasan integrated Safety, Health&Environment (SHE) Policyin place,as partofitscommitmenttoensuring the safety and well-being of all key stakeholders. Each site or subsidiary has adopted the Corporate SHE Policy or developed their own policy in alignment with the Corporate Policy and local regulatory requirements. The Corporate SHE Policy is aligned with other key policies and guidelines like the Group Safety Policy, Consequence Management guidelines, Corporate Sustainability, Corporate Mission, Vision & Values, Responsible Care guidelines, and the

International Labour Organisation (ILO). The Company has adopted a comprehensive approach to ensure the highest standards of safety, health, and environmental protection across the organisation.This policy ensures that all relevant stakeholders are aware of their responsibilities, and the Companys commitmentto upholding the highest standards of safety, health, and environmental protection is maintained.

The Company is committed to ensuring steady improvement in its safety, health, and environment (SHE) performance. The adoption of voluntary standards, such as Process Safety and Risk Management (PSRM), ISO 45001, ISO 14001, Responsible Care, and the British Safety Council guidelines, help the Company to benchmark its performance against established best practices and continuously improve its safety management system. The Companys commitment to safety follows a top-down approach, with the senior management taking the lead in establishing, demonstrating, sustaining and improving the safety culture and creating a safety-conscious workforce. Its specially trained employees are a valuable asset for the Company in identifying and mitigating potential hazards that may arise in the course of their work. Periodic industrial hygiene assessment and medical check-ups are conducted to identify possible risks to human health, and for initiating corrective and preventive steps based on the risk profile of the work area to help the Company to focus its efforts where they are needed the most. Adequate medical facilities are available at all manufacturing sites, and the Company has also established tie-ups with specialised medical facilities, such as hospitals and nursing homes, for ensuring the health and well-being of its employees.

The Company has adopted a continuous improvement approach to its safety performance through the Target Zero Harm programme. The identification of key lead and lag measures, alignment of these measures to functional processes and strategic objectives, besides setting of targets based on past performance, stakeholder requirements, legal and voluntary requirements, and industry benchmarks, are important steps towards achieving the goal of zero harm.

The capture of data associated with key lead and lag measures through various pre-defined reports, log sheets, and web portals is an efficient way to track performance. Pre-defined reports configured in portals for necessary data analysis and management reports help the Company to identify trends and areas for improvement. The use of tools like trend analysis, Root Cause Analysis (RCA), and comparative performance analysis further aid in assessing the current performance and identifying the improvements required.

The introduction of a Positive Assurance Matrix at all the sites to track SHE, Fire Safety and Electrical Safety Performance, which is reviewed by the SHES Committee of the Board, is aimed at ensuring accountability and transparency in the Companys safety performance.

To create a culture of safety, the Company has introduced various programmes to encourage employees to identify and report potential hazards, near-misses and unsafe behaviours. The programme involves training employees on identifying and correcting unsafe behaviours, conducting safety audits, and providing regular feedback. Tata Chemicals has also implemented a comprehensive PSRM programme to manage the risks associated with its manufacturing processes. The Company has also established a Contractor Safety Management programme to ensure that contractors working on its sites follow the same safety standards as Tata Chemicals employees.

The Company has implemented a SIF (Serious Injury and Fatality) Potential Approach as part of its accident prevention programme, to identify and address potential hazards that could lead to serious injuries or fatalities. This is a proactive approach to safety, which goes beyond traditional safety programmes and focusses on the prevention of incidents that have the potential to cause serious harm.The Company has also implemented a Safety Felt Leadership Programme (SFLP) to promote a culture of safety across the organisation, which aims to empower leaders to take ownership of safety and drive continuous improvement in safety performance.

The Company tracks lead indicators under PSI elements to determine the safety progress. The elements of PSI have been selected through prevalent legislative requirements of the respective locations, as well as the world-class frameworks for Safety & Environment Management Systems like ISO 45001, ISO 14001, HSG 65, etc. Annual targets are set for each element, based on organisational requirements and past performance of the locations.

To assist individual units, the Company is working on digitisation and data analytics to forecast key vulnerable areas. Over the past 12 years, the Company has reduced its TRIFRby 62%.

12. Sustainability

At the Company, sustainability is aligned with the UN Sustainable Development Goals, and the Environmental, Social and Governance principles are integrated into its business. TCLs sustainability framework is designed along the axis of Materiality and Responsible Care. During the year, the Company undertook a large-scale stakeholder- driven materiality assessment with the support of a third party.

Aligned to Tata Groups sustainability policy and sustainability ambition, as articulated in its Project AalinganaTCL has articulated its sustainability policy and is taking actions towards three key themes - Climate change and emissions, Circular economy and Resources (Water, Material and waste) management, and Preserving nature and biodiversity.

On the path of decarbonisation, the Company has committed to reduce absolute emissions by 30% and achieve net zero emissions. In line with its commitment, the Company has initiated various levers, on shifting to low emission/carbon neutral fuels, enhancing energy efficiencies, use of renewable energy, and carbon capture and utilisation, with several more in the pipeline.

The Company has committed to becoming water positive and zero solid waste to landfill. As part of its efforts to promote sustainable growth through circular economy, it has adopted the 3R (Reuse, recycle and reduce) strategy at its manufacturing facilities.

The Company has committed to net zero impact on biodiversity, and to the conservation and strengthening of biodiversity in and around the areas of its operations. Its focus is on coastal and marine ecosystem.

The Company has developed an internal tool (Responsible Manufacturing Index) to monitor key sustainability indicators on a monthly basis.

TCL uses frameworks such as ISO 14001, OHSAS 18001, Global Reporting Initiative (GRI), Carbon Disclosure Project (CDP), International Integrated Reporting Council (IIRC), United Nations Global Compact (UNGC), Science Based Target initiatives (SBTi), India Business & Biodiversity Initiative (IBBI) reporting, etc. to disclose as well as to share its performance with stakeholders. This allows the Company to get feedback from the stakeholders and engage with the key customers under supply chain programmes.

Integrated Report

The Company has adopted the I IRC framework to establish integrated reporting within the mainstream business. In accordance with the IIRC Framework, the Company has included an Integrated Report <IR>. The <IR> seeks to provide a concise and integrated account of how the Companys strategy, governance, performance and prospects are delivering on its core purpose - being a global company. The <IR> encompasses all key financial and non-financial performance indicators which are material to the Company as per GRI, UNGC and CDP. It plays a crucial role in establishing the linkages between environmental and social sustainability, as well as the financial growth of the organisation.The <IR> contains assured sustainability data for FY 2022-23 for entities across the enterprise. The financial information has been audited by B S R & Co. LLP, and the non-financial information has been assured by Ernst & Young Associates LLP.

13. Business Excellence

The Company remains committed to continually raising the baron performance in all aspects of its business. The Tata Business Excellence Model (TBEM) serves as a pivotal framework that allows the Company to gain insights into its performance, and establish continuous improvement initiatives for attaining superior business results and maximising satisfaction and value for the customers. TheTBEM framework comprises six core areas of business excellence: Leadership, Strategic Planning, Customer Focus, Analysis and Knowledge Management, Workforce Focus, and Process Ma nagement. Forthe Com pa ny, a globa I organisation that has its manufacturing operations spread across four continents with diverse business segments and employees from different cultures,TBEM serves as a platform to establish a consistent standard of excellence. The Company participated in the Tata Group level TBEM assessment in 2021 and achieved a coveted Industry Leader status. This affirms the Companys commitment to strengthening the culture of excellence and progress towards becoming a world-class organisation.

14. Internal Controls

The Company has an independent Internal Audit function with a well-established risk management framework. The scope and authority of the Internal Audit functions are derived from the Internal Audit Charter approved by the Audit Committee. The Company has engaged a reputable external firm to support the Internal Audit function for carrying out the Internal Audit reviews.

Reviews are conducted on an ongoing basis based on a comprehensive risk-based audit plan, which is approved by the Audit Committee at the beginning of each year. The Internal Audit team reviews and reports to the management and the Audit Committee about compliance with internal controls, and the efficiency and effectiveness of operations as well as the key process risks.

The Audit Committee meets every quarter to review and discuss the various Internal Audit reports, and follow up on action plans of past significant audit issues and compliance with the audit plan.

15. Risk Management Framework

The Company has constituted a robust governance structure consisting of five levels, thereby ensuring both bottom-up and top-down approaches.

A Risk Management Committee (RMC) is constituted to oversee the risk efforts in the Company. The RMC meets quarterly to review key risks and assess the status of mitigation measures. The Companys approach to risk management is designed to provide reasonable assurance that its assets are safeguarded, and the risks facing the business are being assessed and mitigated.

The key roles and responsibilities regarding risk management in the Company are summarised as follows:

1. Board of Directors

• Reviewing and guiding Risk Policy of the Company

• Ensuring the integrity of the systems for risk management

2. Risk Management Committee of the Board

• To formulate a detailed risk management policy which shall include:

o A framework for identification of internal and external risks, specifically faced by the Company, in particular, including financial, operational, sectoral, sustainability (particularly ESG related risks), information, cyber security risks or any other risk as may be determined by the Committee

o Measures for risk mitigation including systems and processes for internal control of identified risks

o Business continuity plan

• To ensure that appropriate methodology, processes and systems are in place to monitor and evaluate risks associated with the business of the Company

• To monitor and oversee implementation of the risk management policy, including evaluating the adequacy of risk management systems

• To periodically review the risk management policy, at least once in two years by considering the changing industry dynamics and evolving complexity

• To keep the Board of Directors informed about the nature and content of its discussions, recommendations and actions to be taken •

• The appointment, removal and terms of remuneration of the Chief Risk Officer (if any) shall be subject to review by the Risk Management Committee

3. Risk Management Group at Senior Leadership Level

• Identification and review of enterprise risks from time to time, initiating mitigation actions, identifying owners and reviewing progress

• Identification and review of risk appetite and risk trigger (at Enterprise Level)

• Implementation of Risk reduction strategies

• Formulating and deploying Risk Management Policy

• Deploying practices for identification, assessment, monitoring, mitigation and reporting of risks

• Providing updates to RMC from time to time on the enterprise risks and actions taken

4. Risk Management Group at Business Unit (BU) Level/ Subsidiary Level

• Reviewing respective BU/Subsidiary risks from time to time, initiating mitigation actions, identifying owners and reviewing progress

• Identification and review of risk appetite and risk trigger (at BU/Subsidiary Level)

• Implementation of risk reduction strategies

• Deploying Risk Management Policy

• Deploying practices for identification, assessment, monitoring, mitigation and reporting of risks

• Providing updates to TCL Management Committee (RMG) and RMC level from time to time on the respective Business / Subsidiary level risks and actions taken

5. Risk Owners

• Responsible for developing and acting on the risk mitigation plan

• Providing periodic updates to RMC on risks with the mitigation plan

Risk Categories

The following categories of risks have been considered in the Risk Management Framework:

• Sustainability Risks are the risks arising out of adverse impacts that the business activities have on environment (planet) and communities (people).

• Strategic Risks include the range of external events and trends (like Government policy) that can adversely impact the Companys strategic growth trajectory and destroy stakeholder value. They also include the risks arising out of the choices the Company has made in defining its strategy.

• Operational Risks are those risks that are associated with operational uncertainties, including failure in critical equipment, attrition, loss of data from cyber attacks, etc.

• Financial Risks are risks faced by the organisation in terms of internal systems, planning and reporting.

• Regulatory and Policy Risksare risks on account of inadequate compliance of regulations, contractual obligations and intellectual property violations, leading to litigation and loss of reputation.

• Reputational Risks include a range of events that creates a mismatch between stakeholdersexpectations and their perceptions of the Companys performance around those expectations.

For more details on key risks and their mitigation plans, please refer to page no. 50 of this Integrated Annual Report.

Cautionary Statement

Statements in the Management Discussion & Analysis describing the objectives, projections, estimates and expectations of the Company, its direct and indirect subsidiaries and its associates, may be forward-looking statements within the meaning of applicable laws and regulations. Actual results might differ substantially or materially from those expressed or implied. Important factors that could make a difference to the Companys operations include, among others, economic conditions affecting demand/supply, price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws, and other statutes and incidental factors.