TD Power Systems Ltd Management Discussions.

"All the meticulous planning and detailing that goes into producing a generator is not something people think of - nor should they! We work hard to make sure that people dont have to think about Generators - after all thats what we do for a living. In tdps we make first class generators for the world."- Our corporate credo which inspires Team tdps to strive for excellence & customer satisfaction.

Some of the special efforts in fiscal 2020 which reinforces faith in our capabilities are as follows:

- A 2 pole Generator which uses waste heat from Gas Turbine exhausts converting the plant from Simple Cycle to a Combined Cycle, supplied to a large power producer of Ivory Coast who produces more than one third of countrys electricity requirement with their privately owned power plants.

- Development & supply of a 14.6 MW Mobile Generator executed for a world class Turbine manufacturer for Fracking application in the Oil & Gas industry in USA.TDPS was selected as the vendor amongst global competition.

- Break through orders from USA - a 3.2 MW steam turbine Generator for an end customer who is a global leader & a 13.5 MW steam turbine Generator designed and supplied by TDPS with UL for a Government funded Research and Development program in USA.

- Recognition & foothold in the Turkish market in short span of presence. Breakthrough orders from -locally reputed customers as well as global companies for steam and Hydro application generators & a challenging order from a global leader based in Israel for Geo thermal application.

- Two efforts demonstrating our R& D & design and manufacturing capabilities.

- First Machine with ATEX Certification and Purging System - designed and developed a 29.7MVA Generator for a leading Turkish EPC player (the Turkish representative of a global industrial products leader) suitable for hazardous area with ATEX Certification (certified by IEP Energy Petroleum Institute) and Purging System for Binary ORC Geothermal Power Plant in Turkey. This is one of the largest machines with CACA cooler designed and supplied by TDPS.

- Developing a Gas Turbine Generator (18.25MVA) with variable output ranging from 16MVA to 23MVA for

different ambient conditions satisfying stringent requirement for a customer in the USA. (This Generator has specialties like, multiple voltage and frequency, Low shaft run out and vibration limit, Hazardous location certified by CSA Group).

- TDPS has emerged a preferred choice for replacement of competitor Generators. Two special orders for replacement - one for a 36 MW steam turbine generator supplied by a reputed manufacturer and another 40MW Gas Turbine Generator for Bolivia for the first time through global leader in power Generator equipment. This is also the first time that TDPS designed and supplied Generator for a special Gas Turbine Series.

- In cooperation with leading power equipment manufacturers, TDPS will be supplying the Diesel Generator set of 2000 kVA for a dedicated emergency standby application in 2020 which is to be installed in an Atomic Power project at Kalpakkam, Tamil Nadu where commissioning of the newly developed Prototype Fast Breeder Reactor (PFBR) Nuclear power plant of500MW has commenced.

- An order for a 10x1600kVA Diesel Engine Generator order for a defence installation in Kolkata, India, signaling one more step to gain foothold in the Indian Defence sector.

- Jointly supplied 2x1250kVA Diesel Engine Generators used for the Satellite Launch pad application- indeed one of the prestigious projects executed by TDPS.

Our capabilities reinforce our position as one of the leading manufacturers of AC Generators for a diverse range of prime movers with output capacities ranging from 1 MW to 200 MW for steam gas turbine up to 35 MW for hydro and up to 20 MW diesel and gas engines and customized rating for wind turbines, catering to both conventional and renewable fuel based power plants. We also have proven ability in manufacture of Generators for Geo thermal applications meeting high performance standards.

The opening order book for fiscal 2020 was Rs.1,03,041 Lakhs, including Railways business of Rs.75,106 Lakhs. Domestic order book stood at 33% and Export including deemed exports orders stood at 67% of the order book excluding traction business. Steam, Hydro & Diesel contributed 48%, 40% & 4% of the order book excluding traction business.

During fiscal 2020 the total orders inflows was Rs.55,606 lakhs including Rs.942 lakhs at Turkey. Domestic order inflows stood at 33%, while Export including deemed exports orders stood at 67% of the order inflow. Steam, Hydro, Diesel & Gas segments contributed to about 49%, 29%, 8% & 14% of manufacturing revenues in fiscal 2020.

While top 10 customers contributed 77% of consolidated revenues in fiscal 2020 (78% in fiscal 2019), we continue to add new customers in our mainstay applications- Steam (Malaysia, Italy, Israel), Hydro (India, Turkey) & Diesel (Germany). We also added a new customer for wind application in Germany. In fiscal 2020 we have succeeded in empaneling our generators for Defense application (Navy). In our quest to have our Generators enlisted widely, we continue to undergo audits by OEMs for supply to Defense, nuclear, wind and Diesel applications.

As of March 31, 2020 (fiscal 2020) 4505 generators have been supplied to over 95 countries. Majority of the Installations are in Asia (including Eurasia) & Middle East (3689) followed by Europe (360), Africa (197, Americas (186) & Oceania (73). The representative country wise installations for each of the continents as follows indicates our global footprint:

Asia & Middle East- India (2846), Japan (67), Korea (26), Thailand (114), Indonesia (114), Philippines (47) and Russia (from Eurasia) (78), Iraq (27).

Africa- South Africa (27), Nigeria (34), Kenya (40), Uganda (18)

Europe- United Kingdom (27), Norway (54), Germany (53), Italy (22), Austria (29) and Turkey (60).

Americas- United States (101)

Oceania- Australia (63)

Our Generators installed in the above locations cater to different applications, specifications, geographical and climatic challenges which proves our design, manufacturing and quality capabilities over the years.

The Turkey and Europe subsidiaries performed well in fiscal 2020. The performance of the overseas subsidiaries is stated in the Directors Report.

Based on the strong order inflow trend, we were heading to what could have been the best year for TDPS in terms of top line sales of about Rs.57,500 lakhs to Rs.58000 lakhs including Turkey. Due to the ongoing Pandemic Covid 19, both manufacturing units of the Company were temporarily shut down from March 23 2020 following the lockdown & restrictions announced by the Central Government which prevented completion of customer inspections &shipping. The company was permitted by the Government of

Karnataka to open its manufacturing units from April 21 2020 since the company had to fulfill orders for supply of emergency power generators for hospitals and Pharma companies producing COVID-19 supplies. However, due to restrictions on inter-district movement of people and nonavailability of materials due to restrictions on our suppliers, operations could be commenced partially with all CoVid related safety & health protocols in place.

As a consequence, manufacturing revenue of about Rs.3,000 lakhs was deferred due to the ongoing Covid 19 pandemic & eventual lockdown from March 23, 2020. The manufacturing revenue was Rs.45,506 lakhs in fiscal 2020 as compared to Rs.40,798 lakhs in fiscal 2019, an increase of 11%. Exports and deemed exports contributed 60% of manufacturing revenues and domestic revenues contributed 40 % in fiscal 2020 which is the same as in fiscal 2019. Steam and Hydro contributed 78% of manufacturing revenues as compared to 75% in fiscal 2019. Steam contributed 49% & Hydro contributed 29% of manufacturing revenue in fiscal 2020 as compared to 61% & 14% respectively in fiscal 2019. Thus, steam and hydro continue to be our mainstay segments & is indicative of the global trends while there is a gradual transition to other applications like diesel, gas, wind & geo thermal applications.

Consequent to successful completion of the required tests and evaluation, deliveries were commenced under the traction business which contributed Rs.4,400 lakhs to the Revenues in fiscal 2020.The project business revenues was Rs.3,162 lakhs in fiscal 2020 as compared to Rs.4,342 lakhs in fiscal 2019.

The standalone total income for fiscal 2020 was Rs.49,761 lakhs as compared to Rs.45,595 lakhs for fiscal 2019. The profit after tax and other comprehensive income is Rs 1,690 lakhs in fiscal 2020 as compared to Rs.697 lakhs in fiscal 2019.

The following ratios reflected a change of 25 % or more on a standalone basis:

- Debtors Turnover - 2.98 times in fiscal 2020 as compared to 2.05 times in fiscal 2019- lower realizations from Debtors as at March 31 2020 due to ongoing Covid 19 pandemic disrupting realization.

- Net profit margin- 3.31 % in fiscal 2020 as compared to 1.59% in fiscal2019 - due to higher sales revenue, operating profit margins, lower tax expense and exceptional income from sale of surplus land.

- Return on Net worth- 3.49% in fiscal 2020 as compared to 1.55% in fiscal 2019-due to higher sales revenue, operating profit margins, lower tax expense and exceptional income from sale of surplus land.

On a consolidated basis, the total income including exceptional item is Rs.54213 lakhs in fiscal 2020 as compared to Rs.46,818 lakhs in fiscal 2019.The profit after tax including comprehensive & exceptional income is Rs.2,885 lakhs in fiscal 2020 as compared to Rs.290 lakhs in fiscal 2019. During fiscal2020, a write back of Rs.1,200 lakhs was affected in the Indian subsidiary (DFPS) in respect of dues to overseas supplies.

The following ratios reflected a change of 25 % or more on a consolidated basis:

- Debtors Turnover - 2.98 times in fiscal 2020 as compared to 2.05 times in fiscal 2019- lower realizations from Debtors as at March 31 2020 due to ongoing Covid 19 pandemic disrupting realization.

- Net profit margin-5.81 % in fiscal 2020 as compared to 0.70 % in fiscal 2019 - due to higher sales revenue, operating profit margins &lower tax expense on standalone basis and exceptional income from sale of surplus land on standalone basis and in Indian subsidiary as well as growth in turnover& profits in overseas subsidiary.

- Return on Net worth- 7.04% in fiscal 2020 as compared to 0.77% in fiscal 2019 due to higher sales revenue, operating profit margins &lower tax expense on standalone basis and exceptional income from sale of surplus land on standalone basis and in Indian subsidiary as well as growth in turnover& profits in overseas subsidiary.

The Turkey and Europe subsidiaries performed well in fiscal 2020. The performance of the overseas subsidiaries has been stated in the Directors Report.

Outlook

We witnessed a continuation of the strong order inflow for fiscal 2021. We had a spillover from last year up to around Rs.3000 lakhs which is also the postponements up to approximately the same amount from the original order book. Most of the postponements are from the Indian market with almost negligible postponements from our overseas orders. There are no order cancellations as of date. The pending order book as on 01st April 2020 was Rs.1,10,691 Lakhs (Rs.1,02,124 lakhs for India and Rs.8,567 lakhs for Turkey), including traction business of Rs.71,507. The share of exports and deemed exports is 66% of order book excluding traction business.

Manufacturing facilities were partially reopened on April 21 2020 after obtaining necessary approvals from the Government Authorities. With the progressive easing of the lockdown restrictions from May 3 2020 & further

permissions and relaxations, it has been possible to achieve almost normal operational levels from around May 11 2020. The Company however, adopted work from home policy during the entire duration of the lockdown for the Management Staff. Required steps were initiated to restart operations with safety and CoVid related protocol in place including those relating to movement of work men & staff, materials & shipment of finished goods. The incremental costs incurred by the company to adhere to the standard operating procedures notified by the Government / Authorities was not very significant. The lockdown affected the sales of the company severely in Q1 of fiscal 2021 since almost 6 weeks were lost. It is expected that, sales will recover substantially by the end of first half of 2020 and the impact on our business in fiscal 2021 is not expected to be material since exports contribute to majority of our sales and we do not see any material impact on demand in our international business in the short term. The company may have to resort to 3rd Shift full operations to meet the targets. Initially there were signs of impact on the domestic sales both in fiscal 2020 and fiscal 2021.

However, since the end of the first quarter of fiscal 2020, recovery in the markets seems to be reviving gradually. While international markets did not collapse like the Indian market, we are seeing signs of recovery in the domestic market and we expect full recovery to be in place by the end of the fiscal 2021.

The order inflow has been somewhat impacted but our pipeline is very strong and we do not see any reduction of order inflow by the end of first half of fiscal 2021. It takes time to revive the momentum back to normal. Subsequently, if the domestic market continues to recover as expected, we will see comparable numbers compared to last year by the end of second half of fiscal 2021 which will drive the forecasts for next year. Needless to say, these forecasts are based on no further lockdowns.

We are happy to Report a substantial order for 9 machines of 9 MW from a major US based engine maker for a barge mounted de-salination plant to be delivered to Saudi Arabia. These machines are to be delivered in the 3rd quarter of this fiscal 2021. In addition, we have received 3 more generators as prototype orders for 3 more engine types & so our business with this engine maker is progressing well and is a very good prospect for the future.

Our traction business in India for this year has been impacted by the ongoing Covid 19 pandemic. Our customer has reduced the forecast by about Rs.3500 lakhs as compared to the original projections due to the delay of production at their

plant owing to the lockdown. Effectively that is around 3 months of production for this customer and that corresponds to the time that they have lost. However, they are expected to be at peak production rate from November in this fiscal 2021 which will lead to full volume from thereon into the next fiscal 2022 promising to be Rs.10,000 lakhs topline segment for us.

Similarly, we are seeing a marked slowdown in projects in the Hydro Segment since typically these machines are highly customized and require a lot of face to face meetings and international travel. This has slowed down considerably but there are a few big orders that were close to finalization pre- COVID that will be finalized in the next few months and those orders will help the numbers for fiscal 2022 substantially.

The segments that are doing well at the moment are engine, steam turbine, gas turbine, special machines and our replacement business. The top line of our subsidiary, TDPS Turkey will be extraordinary this year with sales of around Rs.10,000 lakhs. We are awaiting the Government policy extensions to firm up the outlook for next year. We expect the announcement any moment now since it is long overdue. But there is an impact of fresh investments in Turkey due to Covid-19 and we expect to see the effects in the business for fiscal 2022.

We reiterate that business for fiscal 2021 is still stable at this time and expect fiscal 2021 to be a good year for the company. Our push for cost reductions is ongoing which is expected to yield benefits in fiscal 2021 too. While we are well placed to capitalize on any upswing in domestic demand as well as overseas markets, exports will continue to be our focus area in fiscal 2021. We also continue to focus on building our existing portfolio of generators for other applications. The Company continues to remain debt free and maintains a healthy cash position.

We are confident of achieving sustainable growth, considering improvement in the domestic market, results of our overseas efforts, our diversified portfolio of applications and world class manufacturing facility. With the strong order inflow and the overall market scenario in the beginning of the year, it seemed that fiscal 2021 was on the track to be an exceptional year with an expected 25% growth.However, due to the impact of covid, that growth may be impacted but we hope to achieve double digit growth including our Turkey business.

Risk Management and Mitigation

The Companys business relates to manufacture and sale of generators falling under capital goods sector and is

dependent on national & global economic growth, investment climate and business confidence as well as the sectors where in the Companys products are used.

Our significant presence helps us to weather the vagaries in the domestic market & we are well placed to capitalize on any upswing in domestic demand. Our focus on exports and ongoing association with leading global leaders are the drivers which is imparting sustainability & growth for the companys operations. This will also help the Company in mitigating risk arising out of dependence on either domestic or overseas markets.

Some of the major risks being faced by the Company are described herein below:

Economic slowdown and market concentration

A conducive investment climate and interest rate regime, global economic and market conditions drive growth and performance of the industrial sector which forms the Companys customer base. An economic slowdown directly impacts the demand for capital goods, including the products of the Company.

Further, over dependence on any market/s may adversely affect the performance of the Company, if the concerned market is faced with factors stated above. The Company continues to focus on marketing its products in the global markets and has collected top notch references which has enabled it to gain a firm foothold in the overseas markets. In fact, we are gradually moving towards a dominant player in certain verticals in the overseas market. We have consistently grown our export base, by adding new OEMs within &increased market share in existing verticals through better pricing, customization etc. and diversifying into introducing new product verticals. The Company continues to direct significant resources establishing a global footprint to mitigate the risk of over dependence on certain countries/regions.On the back of such initiatives, the contribution of exports to the total turnover has significantly grown and provided sustainability to our revenues. Manufacture & supply of generators in Turkey catering to the Turkey market requirements which promises to be a significant market for the Company is a noteworthy step in this direction. Increasing acceptance and ordering by European customers on our Europe subsidiary reflects the success of our overseas marketing foray.

Technology and Product concentration

Steam turbine generators continue to be a major contributor of our standalone net sales year on year. Advanced technology relating to steam turbine generators or the development of steam turbine generators that prove

superior in quality or effectiveness to our generator could affect our dominant market position in this segment. However, our R& D & design capabilities support technological & design upgrades to meet customer specifications & requirements.

Even though Steam generators accounted for a significant portion of the revenues, the contribution of hydro, gas and other applications is consistently growing de risking the products mix. We have also acquired rights to technology relating Hydro generators from a globally reputed OEM. The continuing efforts to diversify offerings in product verticals catering to horizontal hydro generators, vertical hydro generators, diesel engine generators, wind turbine generators, gas engine generators, gas turbine generators, high voltage motors and generators for Geo thermal and Solar thermal applications enables market presence across the spectrum of generator market in India and overseas reducing dependence on any particular industry or market segment.

Technology Risk

Response to and adoption of advanced technology and emerging power generation industry standards and practices on a cost-effective and timely basis is critical to sustaining and growing market reach of the Company.

The Company operates in the engineered-to-order capital goods industry where product efficiency, critical product features and overall life cycle costs play an important role.

The company designs generators on the basis of customer requirements/specifications. The Companys team is engaged continuously in design and development of generators meeting customer requirements from time to time. It is an ongoing activity of the design group to develop generators for special applications.

Technology absorption continues and orders are being received for generators with special applications and varied specifications. As a part of the technology agreements, the Company receives updation of technology and processes continuously from licensors.

Competition Risk

Given the significant exposure to overseas OEMS, the Company faces competition from large corporations in Europe, America and in South East. These large corporations have access and derive significant benefit of advanced technologies, greater global reach, and larger financial resources enabling them to sell products at prices lower than the Companys, which may have an adverse effect on the Companys market share and results of operations. This may

compel the Company to quote aggressively impacting its margins.

With a view to mitigate this risk, the Company continues to provide value proposition to customer with products which meet the benchmark efficiencies at a competitive price and shorter delivery time. The Company continues to upgrade its engineers to order platform and design capabilities by incorporating latest technologies in its products and improvements in the design of generators enabling it to offer more efficient machines. Reduction in production, distribution costs and improvement in operating efficiencies are continuously pursued enabling it to offer competitive prices. The Company prioritizes its supply chain in sourcing good quality raw materials and other inputs at competitive prices with high reliability in meeting delivery timelines.

Risk arising from transnational sale of products

In view of export of product to several countries in various continents, there is a risk of various types of claims from customers towards under performance of product and third party claims if the laws of that country are not fully conformed to.

The Company has strict quality control procedures which ensure that all the products supplied to the customers must meet the contractual parameters. It is ensured that the contracts with customers clearly specify the obligations of the Company. In addition, the Company takes appropriate contractually insurance policies to cover all such risks.

Manufacturing facilities, Design and Development

We have 2 manufacturing units, both located at Bangalore equipped with advanced automation/ machines which help in delivering quality products at competitive prices. One of the facilities is a dedicated large generator manufacturing unit with state-of-the-art machines and equipment. Both the manufacturing units are ISO 9001:2015 compliant. We invest in upgradations, modernization and automation of processes and design on an ongoing basis to ensure that our facilities are state of the art in generator manufacture. We have also setup a facility near Istanbul in Turkey for manufacture of generators for Turkish market.

The Companys R&D facility which is approved by the Department of Scientific Industrial Research, GOI focuses on adoption of new technology and development of superior designs enhancing performance, quality and reducing cost. The Companys team is engaged continuously in design and development of generators meeting customer requirements from time to time. Projects to develop generators for Special application design modification and enhancement are ongoing. Our generators are approved by reputed and leading engineering consultants.

Internal Control Systems and their adequacy

The Company has established adequate internal control system, commensurate with the nature of its business and size of its operations in order to ensure quality and reliability of underlying processes focused towards achieving operational efficiency, supported by Management reviews. All audit observations and follow up actions thereon are initiated for resolution by the finance function and Reported to the Audit Committee. Attention is also drawn to the statement on internal financial control in the Directors Report.

Environment, Health and Safety

The Companys environmental, occupational health and safety management systems fulfill ISO 14001-2015 and ISO 45001-2018 for OH&S Management system. As a leading Generator Manufacturer, the Company conducts all its operations in a manner that is protective of the environment, health and safety of employees, customers, suppliers and the community in large and is a zero-discharge facility. In fulfilling this commitment, we maintain and continually improve all our process and complying with legal and other requirements, in order to

a. Ensure safety and Health of our employees, associated stakeholders and focus on how to make the world a better place to live.

b. Comply with all applicable legal Safety and Health performance of individuals at different levels while considering their career advancement in the organization.

c. Enhance Safety, Health and Environment (SHE) awareness amongst employees and associated stakeholders through effective communication and training.

d. Ensure SHE responsibility amongst all the employees in their practices, promote and value their involvement in achieving the goals of this policy.

e. Fix responsibility of SHE policy and procedures on the contractors, Sub-Contractors, Transporters and all other agencies operating with the Company.

f. Integrate Health & Safety in all decision-making processes of the company including those dealings with purchase of plant equipment, machinery & materials as well as selection and placement of personnel.

Adopt all the relevant techniques & methods such as risk assessment and safety audits at appropriate intervals of time to assess the status on Quality, Environment and Health &

Safety and take relevant remedial measures to overcome problems encountered.

Human Resources

Continuous skill development and enhancement is important for the Company with its focus on quality &export markets. The Company is committed to training, skilling and up skilling it/s work force on an ongoing basis which ensures that its work force is able to adopt evolving technologies, processes and techniques. The Companys leadership engages affirmatively in employee development and engagement activities such as involvement in the Corporate Responsibility initiatives, active participation of work force in safety initiatives, quality improvement programs, language skills, leadership development programs, training programs and training under license agreements, on an ongoing basis. During the year, about 53-man hours per employee was dedicated for training. Employee relations continue to remain peaceful and cordial. As on March 31, 2020, the total strength of employees, including permanent, contract basis and trainees stood at 1,141.

The Company believes in equal opportunity in recruitment and in the course of the employment among employees regardless of color, race, gender, social origin, caste or religion. Efforts are continuously made to create an inclusive working environment for women and to integrate them in organizational functions.

In a new initiative of recruiting women employees for the first time in the manufacturing unit, 10 women employees were recruited during August 2019 & provided technical training. They are currently deployed in the Stator Coil Insulation section used in manufacturing a product for the Railways.

The Company firmly believes that every woman employee of the Company has a right to work in an environment free from sexual harassment, intimidation or offensive behavior and in which issues of harassment will be resolved without fear of reprisal. In this direction a Policy on prevention/prohibition of sexual harassment of woman at Companys workplace ("Policy") is in place to take effective measures to avoid and eliminate and if necessary to impose punishment for any sexual harassment in the Companys work place integrated with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company continues to reinforce the Code of Business Conduct across functions/workforce. In order to enhance communications and to create a congenial environment, the organizational leadership and the shopfloor employees of the company have invested significant amount of time and effort.

Financial Review Consolidated basis

The results of operations as of and for fiscal 2020 and 2019 on a consolidated basis is as follows:

Particulars Fiscal 2020 Fiscal 2019
(Rs. in Lakhs) % of Total Income (Rs. in Lakhs) % of Total Income
Income:
Sales 51,489.34 97.50 45,902.20 98.04
Other Income 1,318.76 2.50 915.90 1.96
Total Income 52,808.10 100.00 46,818.10 100.00
Expenditure:
Consumption of Raw Material, Stores, Spare parts and Components 34,219.52 64.80 27,349.71 58.42
Purchases for Project Business 1,717.82 3.25 4,609.70 9.85
Operating and Other Expenses 12,231.29 23.16 11,226.54 23.98
Interest and Finance Charges 545.19 1.03 284.29 0.61
Depreciation Amortization of Technical Knowhow 2,222.66 4.21 2,598.97 5.55
Total Expenditure 50,936.48 96.46 46,069.21 98.40
Profit Before Tax & Exceptional item 1,871.62 - 748.89 -
Exceptional item 1,405.24 - - -
Profit Before Tax 3,276.86 - 748.89 -
Provision for Taxation 796.68 - 601.13 -
Deferred Tax (513.57) - (172.09) -
Profit/(Loss) After Tax 2,993.75 - 319.85 -
Other Comprehensive Income
Exchange difference on translation of foreign operations (19.41) - (15.76) -
Re-measurement of defined benefit plans (119.44) - (21.35) -
Deferred tax on the above 30.07 - 7.47 -
Total (108.78) - (29.64) -
Total Comprehensive Income 2,884.97 - 290.21 -

Fiscal 2020 compared to Fiscal 2019 INCOME

Total income increased by Rs.5,990.00 Lakhs, or 12.79%, to Rs.52,808.10 Lakhs in fiscal 2020 from Rs.46,818.10 Lakhs in fiscal 2019, primarily due to growth in the Manufacturing Business. The net sales and Other Income contributing to Total Income are as follows:

NETSALES

Net sales was 97.50% of total Income in fiscal 2020 versus 98.04% in fiscal 2019 & increased by Rs.5,587.14 Lakhs, or 12.17%, to Rs.51,489.34 Lakhs in fiscal 2020 from Rs.45,902.20 Lakhs in fiscal 2019.

Net sales from our manufacturing business increased by Rs.8,699.89 Lakhs or 21.95%, to Rs.48,327 Lakhs in fiscal 2020 from Rs.39,627.11 Lakhs in fiscal 2019 contributing 91.51% and 84.64% of our Total Income in fiscal 2020 and 2019, respectively. This growth was mainly on account of growing export markets and the new orders in the Turkey market.

Net sales from our Project Business decreased by Rs.3,112.75 Lakhs or 49.60%, to Rs.3,162.34 Lakhs in fiscal 2020 from Rs.6,275.09 Lakhs in fiscal 2019 & contributed 5.99% and 13.40% of our Total Income in fiscal 2020 and 2019, respectively.

OTHER INCOME

Other income increased by Rs.402.86 Lakhs or 43.99%, to Rs.1,318.76 Lakhs in fiscal 2020 from Rs.915.90 Lakhs in fiscal 2019 contributing 2.50% and 1.96% of our total income in fiscal 2020 and 2019, respectively.

Foreign exchange gain increased by Rs.396.54 Lakhs, to Rs.405.95 Lakhs in fiscal 2020 from Rs.9.41 Lakhs in fiscal 2019 due to gains from forward booking and favorable exchange rates.

EXPENDITURE

Total expenditure increased by Rs.4,867.27 Lakhs or 10.57%, to Rs.50,936.48 Lakhs in fiscal 2020 from Rs.46,069.21 Lakhs in fiscal 2019.

CONSUMPTION OF RAW MATERIAL, STORES, SPARE PARTS AND COMPONENTS

Consumption of raw material, stores, spare parts and components expenses increased by Rs.6,869.81 Lakhs or 25.12% to Rs.34,219.52 Lakhs in fiscal 2020 from Rs.27,349.71 Lakhs in fiscal 2019, primarily due to increase in the volume of manufacturing product. Expressed as a percentage of total

income, a raw material consumed expense contributes 64.80% in fiscal 2020 from 58.42% in fiscal 2019.

PURCHASES FOR PROJECT BUSINESS

Our purchases for Project Business including Japan Subsidiary decreased by Rs.2,891.88 Lakhs, or 62.73%, to Rs.1,717.82 Lakhs in fiscal 2020 from Rs.4,609.70 Lakhs in fiscal 2019 due to lower sales volumes. Expressed as a percentage of total income, purchase for project business contributes 3.25% in fiscal 2020 from 9.85% in fiscal 2019.

OPERATING AND OTHER EXPENSES

Our operating and other expenses increased by Rs.1,004.75 Lakhs or 8.95%, to Rs.12,231.29 Lakhs in fiscal 2020 from Rs.11,226.54 Lakhs in fiscal 2019. Expressed as a percentage of total income, operating and other expenses is 23.16% in fiscal 2020 when compared to 23.98% in fiscal 2019. This was mainly due to increase in power & fuel, salaries and wages, insurance, Bank charges, other manufacturing, repairs & maintenance costs.

Power and fuel expenses increased by Rs.52.39 Lakhs or 7.86%, to Rs.718.55 Lakhs in fiscal 2020 from Rs.666.16 Lakhs in fiscal 2019 on account of increased volume of manufacturing product.

Personnel expenses through salaries, wages and bonuses increased by Rs.268.23 Lakhs or 4.94%, to Rs.5,700.32 Lakhs in fiscal 2020 from Rs.5,432.09 Lakhs in fiscal 2019 due to inflationary increase in salaries of staff and workmen.

Repair expenses increased by Rs.67.72 Lakhs or 26.13%, to Rs.326.88 Lakhs in fiscal 2020 from Rs.259.16 Lakhs in fiscal 2019.

Insurance expenses increased by Rs.8.27 Lakhs or 13.81%, to Rs.68.14 Lakhs in fiscal 2020 from Rs.59.87 Lakhs in fiscal 2019.

Consultancy and Professional charges including contribution to corporate social responsibility increased by Rs.53.14 Lakhs or 14.62%, to Rs.416.72 Lakhs in fiscal 2020 from Rs.363.58 Lakhs in fiscal 2019.

Bank charges increased by Rs.148.68 Lakhs or 51.26% to Rs.438.71 Lakhs in fiscal 2020 from Rs.290.03 Lakhs in fiscal 2019 due to higher utilization of non-fund limits.

Manufacturing expenses increased by Rs.69.61 Lakhs or 48.91%, to Rs.211.93 Lakhs in fiscal 2020 from Rs.142.32 Lakhs in fiscal 2019.

INTEREST AND FINANCE CHARGES

Our interest and finance charges increased by Rs.260.90 Lakhs or 91.77%, to Rs.545.19 Lakhs in fiscal 2020 from Rs.284.29 Lakhs in fiscal 2019, due to higher utilization of working capital and exchange fluctuation with respect to FCNR Loan.

DEPRECIATION AND AMORTIZATION OF TECHNICAL KNOW-HOW

Our depreciation and amortization of technical know-how expense decreased by Rs.376.31 Lakhs or 14.48%, to Rs.2,222.66 Lakhs in fiscal 2020 from Rs.2,598.97 Lakhs in fiscal 2019.

PROFIT BEFORE TAX AND EXCEPTIONAL ITEM

Profit before tax and exceptional item increased by Rs.1,122.73 Lakhs or 149.92%, to Rs.1,871.62 Lakhs in fiscal 2020 from Rs.748.89 Lakhs in fiscal 2019.

EXCEPTIONAL ITEM

Out of the total exception item of Rs.1,405.24 Lakhs, Rs.215.94 Lakhs was towards profit from sale of unutilized

land in TDPS and Rs.1,189.30 Lakhs was on account of write back of payable in DFPS.

PROFIT BEFORE TAX

Profit before tax increased by Rs.2,527.97 Lakhs or 337.56%, to Rs.3,276.86 Lakhs in fiscal 2020 from Rs.748.89 Lakhs in fiscal 2019.

TAXATION

Our tax expense decreased by Rs.145.93 Lakhs or 34.01%, to Rs.283.11 Lakhs in fiscal 2020 from Rs.429.04 Lakhs in fiscal 2019. The company has adopted the revised tax structure including subsidiary DFPS.

PROFIT AFTER TAX

Consequently, our profit after tax increased by Rs.2,673.90 Lakhs to Rs.2,993.75 Lakhs in fiscal 2020 from Rs.319.85 Lakhs in fiscal 2019.

The consolidated net worth stands at Rs.42,500.30 Lakhs increase of Rs.947.54 Lakhs over fiscal 2019.

Stand-alone basis

The results of operations as of and for fiscal 2020 and 2019 on a standalone basis is as follows:

Particulars Fiscal 2020 Fiscal 2019
(Rs. in Lakhs) % of Total Income (Rs. in Lakhs) % of Total Income
Income: Sales 47,894.20 96.93 44,508.69 97.63
Other Income 1,515.09 3.07 1,081.97 2.37
Total Income 49,409.29 100.00 45,590.66 100.00
Expenditure: Consumption of Raw Material, Stores, Spare parts and Components 32,165.40 65.10 28,454.40 62.41
Purchases for Project Business 1,717.82 3.48 2,773.73 6.08
Operating and Other Expenses 11,138.72 22.54 10,352.32 22.71
Interest and Finance Charges 545.00 1.10 284.29 0.62
Depreciation and Amortization of Technical Knowhow 2,199.76 4.45 2,591.10 5.68
Total Expenditure 47,766.79 96.68 44,455.84 97.51
Profit Before Tax and Exceptional Items 1,642.50 - 1,134.82 -
Exceptional Items 215.94 - - -
Profit Before Tax 1,858.44 - 1,134.82 -
Provision for Taxation 728.15 - 600.00 -
Deferred Tax (513.57) - (172.09) -
Profit/(Loss) After Tax 1,643.86 - 706.91 -
Other Comprehensive Income - - - -
Exchange difference on translation of foreign operations 135.66

-

3.88

-

Re-measurement of defined benefit plan (119.44) - (21.35) -
Deferred tax on the above 30.07 - 7.47 -
Total 46.29 - (10.00) -
Total Comprehensive Income 1,690.15 - 696.91 -

Fiscal 2020 compared to Fiscal 2019 INCOME

Total income increased by Rs.3,818.63 Lakhs or 8.38%, to Rs.49,409.29 Lakhs in fiscal 2020 from Rs.45,590.66 Lakhs in fiscal 2019, primarily due to growth in the Manufacturing Business. The net sales and Other Income contributing to Total Income are as follows;

NETSALES

Net sales is 96.93% of total Income in fiscal 2020 versus 97.63% in fiscal 2019 & increased by Rs.3,385.51 Lakhs or 7.61%, to Rs.47,894.20 Lakhs in fiscal 2020 from Rs.44,508.69 Lakhs in fiscal 2019.

Net sales from our manufacturing business increased by Rs.4,565.66 Lakhs or 11.37%, to Rs.44,731.86 Lakhs in fiscal 2020 from Rs.40,166.20 Lakhs in fiscal 2019 contributing to 90.53% and 88.10% of our Total Income in fiscal 2020 and 2019, respectively. Exports & deemed exports contributed 56% of the net sales for 2020. This growth was mainly on account of improved market for our Generators as well as spares.

Net sales from our Project Business decreased by Rs.1,180.15 Lakhs, or 27.18%, to Rs.3,162.34 Lakhs in fiscal 2020 from Rs.4,342.49 Lakhs in fiscal 2019 & contributed 6.40% and 9.52% of our Total Income in fiscal 2020 and 2019, respectively

OTHER INCOME

Other income increased by Rs.433.12 Lakhs or 40.03%, to Rs.1,515.09 Lakhs from Rs.1,081.97 Lakhs contributing 3.07% and 2.37% of our total income in Fiscal 2020 and 2019, respectively.

Foreign exchange gain increased by Rs.455.78 Lakhs to Rs.589.99 Lakhs in fiscal 2020 from Rs.134.21 Lakhs in fiscal 2019 due to gains from forward booking and favorable exchange rates.

EXPENDITURE

Total expenditure increased by Rs.3,310.96 Lakhs or 7.45%, to Rs.47,766.79 Lakhs in fiscal 2020 from Rs.44,455.83 Lakhs in fiscal 2019.

CONSUMPTION OF RAW MATERIAL, STORES, SPARES PART AND COMPONENTS

Consumption of raw material, stores, spare parts and components expenses increased by Rs.3,711.10 Lakhs, or 13.04% to Rs.32,165.50 Lakhs in Fiscal 2020 from Rs.28,454.40 Lakhs in Fiscal 2019, primarily due to increase in the volume of manufacturing product. Expressed as a percentage of total income, a raw material consumed expense contributes to 65.10 % in fiscal 2020 from 62.41% in fiscal 2019.

PURCHASES FOR PROJECT BUSINESS

Our purchases for Project Business decreased by Rs.1,055.91 Lakhs, or 38.07%, to Rs.1,717.82 Lakhs in fiscal 2020 from Rs.2,773.73 Lakhs in fiscal 2019, due to lower sales volumes. Expressed as a percentage of total income, purchases for Project Business contributes to 3.48% in fiscal 2020 from 6.08% in fiscal 2019.

OPERATING AND OTHER EXPENSES

Our operating and other expenses increased by Rs.786.39 Lakhs or 7.60%, to Rs.11,138.70 Lakhs in fiscal 2020 from Rs.10,352.31 Lakhs in fiscal 2019. Expressed as a percentage of total income, operating and other expenses is 22.54% in fiscal 2020 when compared to 22.71% in fiscal 2019. This was mainly due to increase in power & fuel, salaries and wages, insurance, Bank charges, other manufacturing, repairs & maintenance costs.

Power and fuel expenses increased by Rs.52.39 Lakhs or 7.86%, to Rs.718.55 Lakhs in fiscal 2020 from Rs.666.16 Lakhs in fiscal 2019 on account of increased production activities.

Personnel expenses through salaries, wages and bonuses increased by Rs.317.64 Lakhs or 6.51%, to Rs.5,197.14 Lakhs in fiscal 2020 from Rs.4,879.50 Lakhs in fiscal 2019 due to inflationary increase in salaries of staff and workmen.

Welfare expenses increased by Rs.179.16 Lakhs, or 20.61%, to Rs.1,048.30 Lakhs in fiscal 2020 from Rs.869.14 Lakhs in fiscal 2019. Repair expenses increased by Rs.53.22 Lakhs or 20.71%, to Rs.310.18 Lakhs in fiscal 2020 from Rs.256.96 Lakhs in fiscal 2019.

Consultancy & Professional charges including amount spent on corporate social responsibility activities are increased by Rs.58.68 Lakhs or 22.00%, to Rs.325.43 Lakhs in fiscal 2020 from Rs.266.75 Lakhs in fiscal 2019.

Bank charges increased by Rs.102.49 Lakhs or 36.72% to Rs.381.57 Lakhs in fiscal 2020 from Rs.279.08 Lakhs in fiscal 2019 due to higher utilization of non-fund limits.

INTEREST AND FINANCE CHARGES

Our interest and finance charges increased by Rs.260.71 Lakhs or 91.71%, to Rs.545.00 Lakhs in fiscal 2020 from Rs.284.29 Lakhs in fiscal 2019, due to higher utilization of working capital limits and exchange fluctuation with respect to FCNR Loan.

DEPRECIATION AND AMORTIZATION OF TECHNICAL KNOW-HOW

Our depreciation and amortization of technical know-how expense decreased by Rs.391.33 Lakhs or 15.10%, to Rs.2,199.76 Lakhs in fiscal 2020 from Rs.2,591.10 Lakhs in fiscal 2019

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS

Profit before tax and exceptional items increased by Rs.507.67 Lakhs, or 44.74%, to Rs.1,642.50 Lakhs in fiscal 2020 from Rs.1,134.83 Lakhs in fiscal 2019.

EXCEPTIONAL ITEM

The company has sold un-utilized portion of industrial land resulting in a gain of Rs.215.94 Lakhs which is Reported under exceptional item.

PROFIT BEFORE TAX

Profit before tax increased by Rs.723.61 Lakhs or 63.76%, to Rs.1,858.44 Lakhs in fiscal 2020 from Rs.1,134.83 Lakhs in fiscal 2019.

TAXATION

Our tax expense including deferred tax decreased by Rs.213.33 Lakhs or 49.85% to Rs.214.58 Lakhs in fiscal 2020 from Rs.427.91 Lakhs in fiscal 2019. Pursuant to Taxation Laws (Amendment) Ordinance 2019, dated September 20, 2019, the Company exercised the option permitted u/s 115BAA of the Income Tax Act, 1961 to compute Income Tax at the rate of 22% plus applicable surcharge and cess (i.e. effective tax rate of 25.168%) from the fiscal 2019-20. Tax expense for the year is after considering the impact of revised tax rates.

PROFIT AFTER TAX

Our profit after tax increased by Rs.936.94 Lakhs to Rs.1,643.86 Lakhs in fiscal 2020 from Rs.706.92 Lakhs in fiscal 2019.

FORWARD-LOOKING STATEMENT

Statements in the Management Discussion and Analysis describing the Companys plans, estimates and projections may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may materially differ from those expressed or implied in the Report. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.