tvs electronics ltd Management discussions

Global Economic overview the global economy is showing signs of a gradual recovery, regardless of the challenges posed by the ongoing Russia-Ukraine conflict and the adoption of a tightening monetary policy by several nations. as economies showcase signs of reopening, disruptions in supply chains are diminishing, leading to stabilisation in energy and food markets, that were previously impacted by the conflict. Additionally, many central banks are implementing coordinated efforts to tighten monetary policy, aiming to achieve target levels of inflation and yield positive results.

according to the International Monetary Fund (IMF), global growth is projected to experience a slight downturn, decreasing from 3.4% in 2022 to 2.8% in 2023. there is an anticipated decline in global economic growth for advanced economies, with a decrease from 2.7% in 2022 to 1.3% in 2023. Several factors contribute to this, including policy measures aimed at curbing inflation, the lasting impact of recent financial conditions ,the on going Russia-Ukraine escalating geopolitical tensions. However, emerging markets and developing economies are expected to showcase stronger economic prospects, with predicted growth of 3.9% in 2023, further increasing to 4.2% in 2024.

The global inflation rate is projected to decrease from

8.7% in 2022 to 7.0% in 2023, with a further decline to 4.9% in 2024. This decrease can be attributed to factors, such as interest rate hikes, lower energy and food prices, and the easing of supply chain pressures. However, it is important to note that core inflation, which excludes volatile items, has shown more resilience to these factors.

Despite these projections, it is crucial to recognise that the recent instability in the banking sector serves as a reminder of the fragile nature of the global economic outlook. Downside risks remain dominant, and uncertainty is increasing. It is important not to underestimate the potential consequences of a sudden and significant tightening of global financial conditions. This could result in significant capital outflows, a rapid increase in risk premiums, a flight to safety resulting in the appreciation of the US dollar, and substantial declines in global economic activity. Consequently, confidence may reduce, household spending could decrease, and levels of investment may decline, further exacerbating the challenges faced by the global economy.

outlook

The global economy is preparing to face a new set of challenges and a decline in activity. These obstacles arise from various factors, including the slow pace of structural reforms, rising trade tensions, declining direct investment, and a slower adoption of innovation and technology, particularly in fragmented regions.

However, there is a more optimistic outlook for 2024, with a projected growth rate of 3.0%. It is widely anticipated that the downturn will be moderate, allowing for an opportunity to effectively address global issues and navigate these challenges. This period of moderation presents a chance for collective action and strategic measures to be taken to mitigate the impact of these obstacles and promote sustainable growth in the global economy.

(Source: International Monetary Fund, April 2023)

Indian Economic overview

The Indian economy has showcased remarkable resilience, surpassing many other nations and positioning itself on a growth trajectory of 7.2% for 2022-23. This impressive performance can be attributed to several factors. Firstly, there is an optimistic business environment that has fostered investment and entrepreneurship. Additionally, robust industrial output and increased consumer spending have contributed to economic growth. Furthermore, the implementation of the ‘Aatmanirbhar Bharat vision has helped boost domestic production and reduced dependence on imports. This focus on self-reliance has created opportunities for domestic industries and facilitated economic growth.

The Consumer Price Index (CPI) was recorded at 4.7%, primarily driven by a significant decrease in food inflation. This decrease is indicated by the Consumer Food Price Index (CFPI), which reached 3.84% in April 2023, compared to 8.31% in April 2022. Indias growth momentum has remained consistent, despite the challenges posed by global macroeconomic factors and the necessity of adopting tighter monetary policies to address inflationary pressures. This resilience reflects the strength and revival of Indias economy in the face of external challenges, reinforcing its robustness and potential for continued growth.

Over the past decade, India has experienced remarkable economic growth, elevating its position from the tenth-largest economy to becoming the fifth-largest globally. This growth has been accompanied by a strong focus on developing physical infrastructure across various sectors. To enhance infrastructure development, the Indian Government has implemented several programmes and initiatives. One significant initiative is the National Infrastructure Pipeline (NIP), which was introduced in 2021. The NIP has witnessed significant expansion, encompassing over 9,000 projects across 35 sub-sectors. Additionally, the Government has introduced the Production Linked Incentive (PLI) Scheme, allocating Rs1.97 trillion to be spent over the next five years in 13 sectors. This scheme aims to promote investment, innovation, and strengthen the countrys manufacturing capabilities, aligning with the Governments ‘Make in India initiative and the National Manufacturing Policy.

In addition, initiatives like ‘Amritkaal and ‘Saptarishis focus on bridging economic disparities, empowering individuals in rural areas, enhancing technological capabilities, and reducing dependence on Government assistance. The Governments commitment to inclusive development, coupled with efforts to expand infrastructure, tap into untapped opportunities, promote sustainable growth, harness the youth demographic dividend, and strengthen the financial sector, are key drivers propelling India towards a promising and prosperous future.

DIGITAL INDIA

The Government of India has launched the Digital India programme with the vision of transforming India into a digitally empowered society and a knowledge-based economy by ensuring digital access, digital inclusion, digital empowerment, and bridging the digital divide. The goal is to ensure that digital technologies improve the lives of every citizen, expand Indias digital economy, create investment and employment opportunities, and develop digital technological capabilities in India.

In order to become a digital nation, India has meticulously constructed a comprehensive Digital Public Infrastructure that serves as a foundation for progress. Digital payments have become ubiquitous, thanks to the implementation of FasTag, GST, and eWaybill, reducing border waiting times from days to mere minutes. Digilocker has revolutionized transactions by eliminating the need for physical paperwork. Moreover, Indias Digital Public Infrastructure (DPI) includes Account Aggregator, which enables users to access and control their own financial data. By blending elements of both public and private sectors, these DPIs help make the government efficient. At present, India stands alone as the sole nation in the world actively constructing population-scale APIs and open networks to digitally transform society.

DRIVING ELECTRONICS MANUFACTURING

The Modified Special Incentive Package (M-SIPS), as of the date, 315 applications with proposed investments of approximately Rs 85,632 Crore have been approved. Additonally, under the Electronic Manufacturing Clusters (EMC) scheme, 19 Greenfield EMCs and 3 Common Facility Centres (CFCs) measuring an area of 3,464 acres with a project cost of Rs 3,732 Crore, including Government Grant-in-aid of Rs 1,529 Crore, have been approved in 15 states across the country. Based on the closure of receipt of applications under the EMC scheme, MeitY notified the Modified Electronics Manufacturing Clusters (EMC 2.0) Scheme on April 1, 2020 to further strengthen the infrastructure base for the electronics industry in the country and deepen the electronics value chain.

outlook

According to the Indian Governments Economic Survey, India is anticipated to achieve a baseline GDP growth of 6.5% in real terms during the 2023-24 period. According to a Goldman Sachs report, India is projected to surpass the United States and become the worlds second-largest economy by 2075. The report highlights Indias potential for long-term growth due to factors such as its young population, urbanisation, and productivity gains. The study predicts that Indias GDP could reach USD 88 trillion by 2075, with an average growth rate of 5% over the next five decades. However, the report also emphasises the importance of implementing structural reforms and investments in infrastructure, education, and healthcare to realize Indias growth potential.

(Source: The Economic Times)

INDUSTRY OVERVIEW

it sector review

The Indian economy has experienced a significant boost fuelled by the Information Technology (IT) sector, which has emerged as a major driving force, contributing substantially to the countrys GDP and public welfare. With the extensive integration of innovative digital applications across various sectors, India is strategically positioned to enter the next phase of growth in its IT revolution. In a positive development, Indias position in the Global Innovation Index (GII) witnessed a notable improvement in the 2022 edition, climbing six spots. At present, India stands at the 40th position in the GII rankings.

According to the National Association of Software and Service Companies (NASSCOM), the Indian technology sectors growth rate decelerated to 8.4% in 2022-23, reaching a value of USD 245 billion. This represents a slowdown compared to 2021-22, when the industry experienced robust growth of 15.5%, reaching a milestone of USD 226 billion. In constant currency terms, Indias export revenue in the IT sector increased by 11.4% to USD 194 billion. In reported terms, it grew 9.4%, considering the cross-currency impact of 2%. With the addition of 2.9 lakhs new positions in 2022-23, the IT industrys total workforce expanded to 5.4 million individuals. Particularly, 36% of these employees possess digital skills, positioning India as a global leader in this field. Additionally, Indias

IT industry ranks second in AI/ML talent availability and third in the installed base of cloud professionals. Furthermore, the industry added 1.4 lakhs women employees in 2022-23 to its workforce, contributing to a total of over 2 million women professionals employed in the IT sector.

The establishment of Global Capability Centres (GCCs) has played a significant role in positioning India as a preferred destination for Engineering Research and Development (ER&D) activities. In 2022-23, India witnessed an increase of 65 new GCCs, bringing the total count to 1,570. The ER&D sub-sectors experienced a remarkable growth rate, accelerating at 11.1%, and nearly doubling in size. Indias thriving startup ecosystem is also worth mentioning, with approximately 27,000 startups currently operating in the country. The addition of 1,300 new startups, which further bolstered the entrepreneurial landscape, while the emergence of 23 new unicorns, startups valued at over USD 1 billion, illustrates the robust growth and potential of Indias startup ecosystem.

According to a report by IBEF, the Indian IT and business services industry will experience significant growth, reaching an estimated value of USD 19.93 billion by the year 2025. A survey conducted by Amazon Web Services in 2021 predicts a remarkable nine-fold increase in the number of digitally skilled workers in India by the same year, further contributing to its prowess in the IT domain.

IT PERIPHERALS MARKET

In recent times, there has been a significant surge in the demand for laptops compared to traditional desktop PCs. Both desktops and laptops/notebooks have experienced growth due to increased corporate purchases driven by the growing trend of digitalisation.

Mobile phone accessories encompass a range of supplementary devices and equipment designed to enhance the functionality of mobile phones. These accessories include chargers, headphones, earphones, mobile covers, selfie sticks, pouches, and leather cases, among others. In recent years, the market has witnessed the introduction of innovative mobile phone accessories such as USB (Universal Serial Bus) for OTG (On-The-Go) smartphones, Bluetooth keyboards, wireless headphones, and other cutting-edge offerings. The Indian mobile phone accessories market was valued at USD 2,238.4 million in 2022 and is expected to register a CAGR of 9.72% from 2023 to 2030.

According to the latest findings from the International Data Corporation (IDC), the traditional PC market in India, which includes desktops, notebooks, and workstations, demonstrated a year-over-year (YoY) growth of 0.3% in 2022 (January to December), reaching a total of 14.9 million units. During this period, desktops continued to show growth, while notebooks witnessed a YoY decline of 37.8%. Factors such as inflation and low consumer sentiment had a notable impact on the consumer segment, leading to a decline of 27.4%. Additionally, the enterprise segment faced challenges with delayed orders and inventory issues, resulting in a substantial YoY decline of 42.6%.

The Government and education sectors emerged as the leading performers in the PC market in 2022, achieving YoY growth rates of 117.6% and 28.3%, respectively. However, the enterprise segment faced a decline of 5.9% YoY. The desktop category demonstrated strong growth with a YoY increase of 32.3%, while workstations also experienced significant growth at 24.7% YoY. Conversely, the notebook category, which constitutes a substantial portion of the market, saw an 8.4% YoY decline in demand across various segments.

GROWTH DRIVERS

COST ADVANTAGE

One of the primary factors contributing to the growth of the Indian IT industry is its cost advantage. Indian IT firms can offer services at competitive rates compared to their counterparts in developed countries. This advantage has become a major attraction for businesses worldwide to outsource their IT services to India.

RUBUST INFRASTRUCTURE

India has made significant investments in building a robust IT infrastructure, including technology parks, software development centres, and world-class connectivity. This infrastructure serves as a catalyst for the growth of the IT industry, providing an enabling environment for businesses to flourish and expand.

INVESTMENT DESTINATION

India has established itself as a prominent global investment hub, becoming an attractive destination for investors worldwide. The data annotation market in India is anticipated to undergo notable expansion, reaching an impressive value of USD 7 billion by 2030. This growth is primarily fuelled by the increasing domestic demand for artificial Furthermore, the Indian software industry is poised to reach USD 100 billion by 2025. Collectively, these factors paint a positive outlook for the IT and IT peripherals market in India in the foreseeable future.

URBANISATION

The increasing urbanisation of India has led to a rise in demand for electronic goods, particularly driven by urban consumers who have higher disposable incomes and a greater willingness to adopt new technologies. The countrys urbanisation rate is expected to reach

37-38% by 2025, leading to a substantial increase in the demand for IT and IT peripherals.

ADOPTION OF DIGITAL TOOLS

Consumers have moved dramatically towards online channels, and companies and industries have responded in turn. From smartphones and tablets to cloud computing and artificial intelligence, digital tools have empowered individuals to connect, collaborate, and share information globally, breaking down barriers and fostering innovation. As per a McKinsey report, approximately 500 million Indians are connected to the internet, with over 100 million engaging in online transactions. India has experienced one of the fastest accelerations in digital adoption globally, which has further led to the growth of the IT sector in the country.

GROWING MIDDLE - CLASS POPULATION

India is indeed undergoing a digital revolution, leading to a significant rise in the usage of electronic devices. The growing middle-class population and increasing disposable incomes have played a pivotal role in driving consumer demand. Projections indicate that Indias middle class is expected to expand from 250 million to 583 million individuals by 2025, accounting for over 40% of the population. Moreover, there has been a notable surge in the percentage of middle-class Indians aged 25 or younger seeking higher education, . which has increased by more than 60% in the past decade and is predicted to continue rising. This expanding middle class has consequently resulted in a boost in economic consumption across various sectors including electronic products and services.

CONSUMER ELECTRONICS INDUSTRY

The Indian electronics industry stands as a prominent player in the global landscape, showcasing remarkable growth and development. In the contemporary digital era, electronic products have exerted a profound influence on life, consistently moulding and transforming lifestyles. The introduction of cutting-edge technology has not only facilitated seamless operations but also propelled the digital revolution to unprecedented heights. Moreover, the escalating demand for electronic devices is poised to maintain an upward trajectory, positioning them as a pivotal catalyst for global economic advancement.

As per a report by Statista, the revenue generated in the Indian consumer electronics market amounted to USD 69.15 billion in 2022-23. The market is expected to register a CAGR of 5.89% during the period of 2023-28. The markets largest segment is the Telephony segment with a market volume of USD 44.34 billion in 2022-23. It is anticipated that the Indian consumer electronics market will reach to USD 124.94 billion by 2030.

GOVERNMENT INITIATIVES

Some of the major initiatives taken by the Government to promote the IT sector in India are as follows:

- In the Union Budget 2023-24, the allocation for IT and telecom sector stood at Rs 97,579.05 Crore (USD 11.77 billion)

- The Indian Government has been actively promoting its ‘Make in India belief and encouraging consumer durable brands to emerge self-reliant

-The Prime Minister has launched PM Gati Shakti - the National Master Plan for Multi-modal Connectivity. This initiative aims to establish a digital platform that brings together 16 Ministries, including Railways and Roadways, in order to facilitate integrated planning and coordinated implementation of infrastructure connectivity projects, thereby eliminating departmental silos

- The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in the electronics systems design and manufacturing sector. FDI into single-brand retail has increased from 51% to 100%. Further, the Government is planning to hike the FDI limit in multi-brand retail to 51%

RETAIL INDUSTRY

The Indian retail industry has established itself as a highly dynamic and rapidly evolving sector, primarily driven by the entry of numerous new participants. With its significant contribution to the nations GDP exceeding 10% and employment opportunities comprising approximately 8%, this industry showcases its vitality and importance. According to industry sources, Indian retail market is expected to reach USD 1.1 trillion by 2027 and U SD 2 trillion by 2032.

(Source: Investindia.gov.in) banking & finance industry

The Indian banking sector has witnessed remarkable growth and transformation in recent years, establishing itself as a key driver of the nations economy. Evolving consumer behaviours and the rapid advancement of digitalisation have played a crucial role in shaping this sectors progress. With the implementation of various Government initiatives, such as the Pradhan Mantri Jan Dhan Yojana and the Digital India campaign, the sector has made significant strides towards achieving financial inclusion for all citizens.

The embrace of emerging technologies has been a proactive move by the Indian banking sector to enhance scalability and efficiency. Banks have adopted digital platforms, mobile banking, and internet banking services, providing customers with convenient and accessible ways to conduct financial transactions. Furthermore, the sector has leveraged technologies like artificial intelligence, machine learning, and blockchain to streamline processes, mitigate risks, and improve customer experience.

(Source: Ibef.org)

GOVERNMENT

Public Sector Undertakings (PSUs) play a significant role in the Indian economy, encompassing public services and enterprises that deliver benefits to the entire society. These entities are primarily focussed on serving the general public, fostering economic development through job creation, and contributing to the countrys gross domestic product (GDP). In a move to bolster growth within the nation, the Indian Government has sanctioned a budget of Rs 4,500 Crore for the revival of existing PSUs. This allocation aims to provide vital support to these enterprises and stimulate overall economic progress.

SHIPPING & LOGISTICS

The shipping and logistics industry holds immense importance within the Indian economy, making a substantial contribution to the countrys GDP. According to the Economic Survey 2022-23, logistics costs in India have been relatively high, ranging from 14% to 18% of GDP, in contrast to the global benchmark of 8%. The launch of the National Logistics Policy in September 2022 aims to address the intricate challenges associated with Indias infrastructure development. This policy is designed to foster collaboration among the central government, state governments, local administrations, and the private sector, collectively working towards enhancing the efficiency and effectiveness of the logistics ecosystem.

(Source: The Times Of India)

SOLAR ENERGY

Solar energy stands as an abundant and remarkably clean resource that has been recognised by humanity for a considerable period of time. According to the Indian Renewable Energy Development Agency Limited (IREDA), India is endowed with abundant solar energy capable of producing 5,000 trillion kilowatts (kW) of clean energy. Moreover, India gets 300 sunny days a year in most parts of the country and solar insolation of 4-7 kWh per square metre per day. With efficient harnessing and utilisation, solar energy can play a pivotal role in reducing reliance on fossil fuels and curbing carbon emissions associated with conventional methods of energy generation.

(Source: Enphase.com)

ELECTRIC VEHICLE INDUSTRY

The electric vehicle (EV) industry in India is experiencing a rapid expansion, propelled by various factors such as growing environmental concerns regarding air pollution, Government incentives, and declining battery costs. According to the Economic Survey 2022-23, Indias domestic electric vehicle market is projected to achieve a remarkable CAGR of 49% between 2022 and 2030, with an anticipated annual sales volume of 10 million units by 2030. This growth trajectory is not only set to revolutionise the automotive landscape but also has the potential to generate approximately 50 million direct and indirect jobs by 2030, bolstering employment opportunities across the nation.

(Source: Autocarpro.in)

CONTRACT MANUFACTURING SERVICES

The electronics manufacturing sector has experienced remarkable growth, positioning India as an exceptional hub for subcontract manufacturing and attracting global players. The demand for electronics and pharmaceutical products, which surged during the onset of the Covid-19 pandemic, has continued to accelerate. According to a report by Mordor Intelligence on the contract manufacturing organisation market, the Indian contract manufacturing industry is projected to witness a CAGR of 13.3% from 2023 to 2028. This forecast demonstrates the promising outlook for the industry over the next five years, highlighting Indias potential as a key player in contract manufacturing.

The China Plus One (C+1) strategy of diversifying investments from China to other destinations may provide a booster shot to electronics manufacturing in India further. As multinational corporations explore alternative locations, India is poised to capitalise on this trend and further expand its manufacturing footprint in the electronics sector. This presents a valuable opportunity for India to bolster its manufacturing industry and attract greater foreign investment.

COMPANY OVERVIEW

Limited (‘TVS-E or ‘the Company) is recognised as a leading and reputable player in the IT peripherals and consumer electronics market. With the Companys inception in 1986, it has made remarkable progress and evolved into a comprehensive destination, offering a wide range of products and solutions. Leveraging the strong foundation, the Company has established a strong presence in two primary business verticals: products and solutions, along with customer support services.

TVS-Es portfolio caters to the entire lifecycle management process, encompassing activities, such as product ideation, manufacturing, customer support services, warranty management, and end-of-life services. By providing end-to-end solutions, the Company strives to meet the diverse needs of its customers, ensuring a seamless experience throughout their journey.

The Products & Solutions Group (PSG) of TVS-E is responsible for the comprehensive design manufacturing, assembly, marketing, sales, and servicing of an array of products. These include dot matrix printers, thermal receipt printers, label printers, mobile printers, mechanical keyboards, membrane keyboards, mouse, barcode scanners, currency counters, surveillance cameras, touch POS systems, handheld devices, and electronic cash registers, among others.

In addition, the Customer Support Services (CSS) business segment of TVS-E addresses the customer support needs of both original equipment manufacturers (OEMs) and end-customers. This includes services, such as break-fix solutions, repair engineering, installation assistance, product demonstrations, protection plans, IT infrastructure management, remote technical support, call centre services, and e-waste management, among various other services.

TVS-E places significant importance on technological advancements, and it consistently invests in upgrading its technology infrastructure, while simultaneously developing innovative products and services. Furthermore, the Company boasts a robust distribution network comprising 140 sales partners, 600 service partners, and 65+ walk-in stores. This enables it to effectively serve customers in over 19,250 postal codes across India.

BUSINESS SEGMENT OVERVIEW

PSG GROUP

Under this vertical, TVS-E primarily provides products under four categories, as follows:

1	Retail Computing Device - Invoice and Print Bills, Manage Inventories and Sales, Reports & Tax/GST Reconciliation, Payments along with the Retail Billing Software TVS E-Pay
2	Banking Passbook Printing, Ledger Printing, Cash Counting, DD Printing
3	Government Ticketing, Documentation/ Registration, India Posts Receipt Printing
4	Shipping & Logistics - Track and Trace, Manage Stocks/Inventories, Label Printing

TVS-E manages its manufacturing and assembly operations for these products at its facility in Tumakuru. During this review period, the Company emphasised on enhancing its product management team, engineering capabilities, and solution offerings. As part of its strategic plan to establish a unique position in the industry, TVS-E has aimed to provide bundled offers of products and solutions to its customers. Additionally, the Company formed partnerships with various software companies in 2022-23 to solidify its position in this market segment.

Presently, approximately 70% of TVS-Es total revenues are generated from this retail segment. TVS-E has successfully positioned itself as the market leader in thermal printers and the third-largest player in bar scanners. The Company achieved this accomplishment through the establishment of a robust distribution network and a strong commitment to expanding its team, enhancing capabilities, and prioritising customer-centricity. Over the years, TVS-Es product range has adapted to respond to the dynamic needs and demands of its customers.

The Parts and Logistics business provides an extensive selection of spare parts in the ICT and consumer electronics sector, serving the B2B segment for both warranty and out-of-warranty needs. The significant proliferation of consumer electronic products, driven by increased disposable income, growing purchasing capacity, and the availability of diverse electronic products from numerous manufacturers, presents a favourable prospect for operations in this domain.

To enhance cost effectiveness and align with the ‘Make in India initiative of the Government, TVS-E has implemented measures to reduce imports from neighbouring countries. The Company has achieved this by sourcing materials from domestic manufacturers or implementing backward integration strategies to produce these internally. As a result, TVS-E has decreased its reliance on external sources and gained better cost control.

The Company has been consistently expanding its portfolio. In the recent assessment period, TVS-E successfully introduced 2D Barcode scanners, cash counting machines, Highspeed Receipt printers, ‘Make in India Point of Sale machines in new products and revitalised the growing Passbook printer, Gaming Keyboard & Mouse, 1D scanner, Dot matrix printers range, existing products, generating revenues of Rs230 Crore. Moving forward, it has sharpened its focus on manufacturing specific products that are currently absent from its offerings. This strategic approach aims to diversify TVS-Es portfolio by including touch POS systems, handheld devices, billing applications, weighing scales, and other related products. The Company is also building capability in terms of its resources and expanding its exports to various countries. By venturing into these areas, it aims to seize opportunities for growth and further enhance its product range.

DRIVERS OF PSG SEGMENT

Ongoing emphasis on expanding the product range to meet diverse customer needs

Effective brand positioning and industry expertise driving segment growth

Increasing demand attributed to bundled solutions, offered alongside products

Robust sales network, distribution channels, and internal sales team

Commitment to the ‘Make in India initiative, leading to backward integration of previously imported products

Competitive pricing strategies contributing to gaining a larger market share

Consistent efforts to enhance online presence, leveraging social media platforms, and implementing the ‘shop near me feature on Google to improve visibility among end customers

CSS GROUP

Under the customer support services, TVS-E provides four products categories:

1	Field Support Services (FSS)
2	Infrastructure Management Services (IMS)
3	Repair and Refurbishing Management Services (RMS)
4	E-Auction and E-Waste

TVS-E operates a comprehensive FSS that facilitates brand warranty services for multiple categories, including IT & Peripherals, Banking POS, Audio lifestyle & Consumer Electronics products. The Company provides an extensive range of services encompassing, installation and break-fix solutions for an array of products, such as Laptops, Servers, Printers, Scanners, EDC Terminals, Soundbars & Speakers, Smart TVs, Refrigerators and Washing Machines among others. Additionally, TVS-E offers Infrastructure Management Services specifically for End User computing, data centre & Infra applications for MSMEs and SMEs throughout the contractual period apart from providing Roof Top Solar & EV Chargers support Services. Both IMS and FSS involve lifecycle management services for partner-owned brands.

Auction India, an online platform operated by TVS-E, focusses on delivering surplus management solutions to B2B customers (sellers). The primary objective is to assist sellers in effectively getting rid of their surplus inventory, scrap materials, and machinery, among others. This is facilitated through a transparent online bidding system that engages a diverse range of bidders, ensuring the discovery of the optimal price for the items being auctioned.

In addition, with the increasing focus on electric vehicles and solar energies, TVS-E is poised to capitalise on these opportunities. With ample room for expansion and a strong market presence, coupled with established partnerships and enduring relationships with renowned brands, the Company is well-positioned for significant growth. Its reputation for dependability in the product servicing sector further enhances its ability to collaborate with top brands, effectively bridging the gap between brands and the servicing of products with expired warranty.

Within the realm of RMS, TVS-E has expertise in repairing components, such as PCBs and display panels, and it also offers refurbishment services for products intended for the secondary market.

Brand-operated service centres tend to attract individuals due to the trust and credibility associated with these establishments. However, once the warranty period for their products expires, individuals often resort to local repair services or opt to pay for services at third-party centres. TVS-E recognises this service gap and aims to address it by offering on-demand services for a wide range of home appliances, bolstered by its extensive reach across India and robust parts management system.

In 2022-23, TVS-E made substantial progress, expanding its presence to 540 districts, marking a notable increase from the previous years coverage of 490 districts. Moreover, the Companys services now cater to a larger customer base, serving 19,250 postal codes, across country. Looking ahead, the Company aims to further expand its cover and accessibility, with a target of reaching 600 districts in 2023-24.

During 2022-23, the CSS segment experienced significant revenue generation from FSS, IMS & Auction Services, making them the primary revenue drivers. Following closely were RMS & E-Waste. However, the Company anticipates exponential growth in the IMS & RMS segment in the coming years due to the wide gamut of digital initiatives across various organisations. Further, the Government of India has taken initiatives towards making India the ‘Global Repair Hub of the world. Towards this, RMS has taken the potential to scale up revenue and profitability quite significantly.

DRIVERS OF CSS SEGMENT

- TVS-Es ability to cater to the entire lifecycle management of products

- The Companys expertise in handling a wide range of products enables it to effectively manage customer support services and disposal services associated with those products

- The integration of various service categories positions the Company as a holistic provider of lifecycle management solutions, Including Parts management, Repair management services and Infrastructure Management Services.

- TVS-Es continuous efforts to strengthen its social media presence and utilise the ‘shop near me feature on google enhance visibility among end customers

- The growing traction of the EV market presents opportunities for the CSS segment, particularly in managing charging Infrastructure and battery swap services for EVs

- Indias increasing focus on Renewable power, specifically the solar power sector, offers another avenue for TVS-E to expand its service offerings in this sector

FINANCIAL OVERVIEW

during the year under review, TVS-e achieved a total revenue of Rs 354 Crore as against Rs 308 Crore last year, with a growth of 15%. the revenue from ‘products and Solutions segment for 2022-23 was Rs 246 Crore as against Rs 209 Crore in the previous year, with a growth of 18%. on the other hand, the revenue from ‘Customer Support Services segment grew by 9% over last year to Rs 108 Crore. margin declined during the year due to investments in new business initiatives, which increased costs during the year. these new initiatives, focussed on building capabilities, are expected to drive improvements in revenue and margin trends in the upcoming year. the Company has invested in the consolidation of factories and technology upgradation during the year, which are part of the P&L statement and are non-routine.

TVS-Es remains strategically focussed to diversifying its business and achieving economies of scale. to support this objective, the Company has made capital expenditures of Rs 16.79 Crore towards various expansions. the Company is prioritising on controlling debt and expanding its capital expenditures. Moreover, in its pursuit of enhancing product lifecycle management and customer convenience, it has been progressively allocating resources towards technology advancements and digitalisation investments.

There has been no change in the business of TVS-e during the Financial year ended on March 31, 2023.

Key Ratios	2022-23	2021-22
Current ratio	1.41	1.39
Debt equity ratio (x)	0.09	0.04
Operating Profit Margin (%)	4.02	6.91
Net Profit Margin (%)	2.69	4.90
Return on net Worth (%)	9.36	16.31
Debtors turnover ratio (x)	8.66	9.80
Inventory turnover ratio (x)	3.42	3.64
Interest Coverage ratio	10.40	22.18

RISK MANAGEMENT

TVS-E recognises that incorporating risk management into its strategy and planning process is essential for maintaining its long-term sustainability. To identify risks proactively, the Company develops action plans for risk mitigation. The Risk Management Committee, responsible for addressing and mitigating risks, reports to the Board of Directors, who hold the highest level of authority in the corporate governance framework. By prioritising risk management, TVS-E can skilfully navigate potential threats and safeguard its long-term success.

Some of the risks identified and mitigated by the Company during the year under review are as follows:

Risk	Impact	Mitigation strategy
Raw material risk	The increasing price of raw materials price can adversely impact tvs-es profitability.	Tvs-e has experienced the influence of volatile crude and steel prices. The company has also faced difficulties arising from the shortage of semiconductors, which have directly affected the cost of raw materials. Nonetheless, it has successfully enhanced its cost-effectiveness in various areas by diminishing its reliance on imports, implementing backward integration strategies, and establishing in-house production capabilities for materials.
Import risk	Operational continuity may be adversely affected by a heavy reliance on neighbouring countries for the procurement of raw materials and parts, particularly in the event of trade disruptions.	In order to mitigate these risks, tvs-e maintains a vigilant and ongoing monitoring process. The company has proactively addressed this issue by prioritising the substitution of specific materials, previously imported from neighbouring countries, by focussing on the ‘make in india initiative. This has been accomplished through strategic measures, such as backward integration and the exploration of alternative domestic suppliers.
Technology risk	failure to keep pace with evolving technologies and emerging trends can have detrimental effects on the business.	recognising the dynamic nature of the industry, tvs-e has consistently prioritised investments in cutting-edge technologies. By doing so, the company aims to provide its customers with products that surpass current market standards and remain at the forefront of innovation.
Cybersecurity risk	Network failure and data breaches can impact the operations of the company extensively.	The company had a strong intrusion prevention system in place, which coupled with the robust risk management framework of the company ensures that tvs-e is protected against cyber security threats. The company also has covered this risk under appropriate insurance.

TVS-E DIGITAL

It has been a key component in TVS-ES daily operations and growth strategies. the Company has made sustained investments in It. It has consistently reinforced its It infrastructure, enabling the implementation of numerous initiatives throughout the year to enhance its technological capabilities and drive innovation.

- With the aim of enhancing distribution as a revenue channel, the PSG department has implemented a digital layer on their products. This involves a strategic combination of partnerships and acquisitions to expedite the go-to-market (GTM) process, ensuring a faster and more effective expansion of their distribution network

- The E-auction Business unit has observed a rise in traffic to their Auction India portal. To further enhance the customer experience, TVS-e aims to uplift the existing portal. After this improvement, the focus will shift towards transforming the portal into a comprehensive platform that offers a wider range of services and features to cater to the needs of users

- TVS-e has implemented Control tower as a real-time monitoring system for field activities within the services business unit, adding virtual agents to handle incoming customer queries. This aims to provide round-the-clock support, reduce the number of abandoned calls, and enhance the net promoter Score (NPS) by ensuring timely and efficient resolution of customer inquiries

- Significant benefits have been observed from the Customer relationship Management (CRM) system through the parts platform, including cost savings and increased earnings resulting from the scalability of the platform

- TVS-e has adopted Microsoft dynamics 365 (d365) as its new enterprise resource planning (ERP) platform, replacing the existing SAP-ERP system. This strategic shift reflects its commitment to embrace platform-based solutions rather than relying solely on product-based solutions

- Auto Call allocation V2, has been launched to further enhance the Companys savings through the digital platform In addition to these initiatives, it is noteworthy that

TVS-E is ISO 27001 compliant. This certification confirms the Companys adherence to international standards for information security management. It ensures the confidentiality, integrity, and availability of sensitive data and demonstrating TVS-Es commitment to maintaining a secure environment for its stakeholders.