Ujaas Energy Ltd Management Discussions.

GLOBAL ECONOMY OVERVIEW

The calendar year 2020 was a great disruption unleashed by a viral pandemic that hit the world economy very hard. The pandemic spread like a forest fire, reaching every corner of the world, infecting more than 90 million and killing close to 2.8 million people worldwide (as of March 2021). For several months, uncertainties and panic paralyzed most economic activities in both developed and developing economies. The pandemic has exposed the systemic vulnerability of the world economy. Building economic, social and environmental resilience must guide the recovery from the crisis.

World gross product fell by an estimated 4.3 percent in 2020, the sharpest contraction of global output since the Great Depression. The pandemic hit the developed economies the hardest, given the strict lockdown measures that many countries in Europe and several states of the United States of America imposed early on during the outbreak. The developing countries experienced a relatively less severe contraction, with output shrinking by 2.5 percent in 2020. Their economies are projected to grow by 5.7 percent in 2021.

The global recovery, which has been dampened in the near term by a resurgence of COVID-19 cases, is expected to strengthen as confidence, consumption, and trade gradually improve, supported by ongoing vaccination. Activity is expected to strengthen in the second half of this year and firm further next year, as improved COVID-19 management aided by ongoing vaccination allows for an easing of pandemic control measures. Global economic output is expected to expand 4 percent in 2021 but still remain more than 5 percent below pre-pandemic projections. Global growth is projected to moderate to 3.8 percent in 2022, weighed down by the pandemics lasting damage to potential growth.

Indian Economy Overview

Financial Year 2020-21 started with a Nation-wide lockdown in India, although India emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships. The Economic Survey has projected that the economy will grow at 11 percent, up from an estimated historic decline of 7.7 percent in 2020-21, on account of the COV- ID-19 pandemic. Also, the vaccination drive is expected to provide an impetus for the restoration of contact-intensive sectors and a leading edge to the Indian pharma industry in the global market.

The government has the ambition of making India a USD 5 trillion economy by 2024 for which various initiatives have been undertaken in the last few years to improve ease of doing business, encourage Make in India, invite foreign companies to India with schemes like PLI (production-linked incentive) and tweak the legacy labor laws, Agri policies, etc. The Government of India, under its Make in India initiative, is trying to boost the contribution made by the manufacturing sector with an aim to take it to 25% of the GDP from the current 17%. Besides, the Government has also come up with the Digital India initiative, which focuses on three core components: the creation of digital infrastructure, delivering services digitally and increasing digital literacy.

With the shift in sentiment to reduce dependence on a single country i.e. China, there is an increasing interest from international companies wanting to invest in India. Interest is largely from Asia led by Japan, Korea and Thailand although we are also seeing interest from Europe. Some of these enquiries are in sectors such as agrochemicals, building products, logistics, packaging, and new-age technology including electronics, sectors where we have not seen significant interest in the past.

Global Renewable Overview

The International Energy Agencys World Energy Outlook projects a growth of renewable energy supply to 4,550 GW in 2040 on a global basis. Renewable energy use increased 3% in 2020 as demand for all other fuels declined. The primary driver was an almost 7% growth in electricity generation from renewable sources. Long-term contracts, priority access to the grid, and continuous installation of new plants underpinned renewables growth despite lower electricity demand, supply chain challenges, and construction delays in many parts of the world. Accordingly, the share of renewables in global electricity generation jumped to 29% in 2020, up from 27% in 2019. Bioenergy use in industry grew 3%, but was largely offset by a decline in biofuels as lower oil demand also reduced the use of blended biofuels.

Renewable electricity generation in 2021 is set to expand by more than 8% to reach 8 300 TWh, the fastest year-on-year growth since the 1970s. Solar PV and wind are set to contribute two-thirds of renewables growth. China alone should account for almost half of the global increase in renewable electricity in 2021, followed by the United States, the European Union and India.

Increases in electricity generation from all renewable sources should push the share of renewables in the electricity generation mix to an all-time high of 30% in 2021. Combined with nuclear, low-carbon sources of generation well and truly exceed output from the worlds coal plants in 2021. In 2021, the biofuels market is likely to recover and approach 2019 production levels as transportation activity slowly resumes and biofuel blending rates increase. Biofuels are consumed mostly in road transportation, blended with gasoline and diesel fuels, and thus are less affected by continued depressed activity in the aviation sector.

https://www.iea.org/reports/global-energy-re-view-2021/renewables

Indian Renewable Overview

Indian renewable energy sector is the fourth most attractive renewable energy market in the world1. India was ranked fifth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2019. Installed renewable power generation capacity has gained pace over the past few years, posting a CaGr of 17.33% between FY16-20. With the increased support of Government and improved economics, the sector has become attractive from investors perspective. As India looks to meet its energy demand on its own, which is expected to reach 15,820 TWh by 2040, renewable energy is set to play an important role. The government is aiming to achieve 227 GW of renewable energy capacity (including 114 GW of solar capacity addition and 67 GW of wind power capacity) by 2022, more than its 175 Gw target as per the Paris Agreement. The government plans to establish renewable energy capacity of 523 GW (including 73 GW from Hydro) by 2030

As of May 2021, India had 95.7 GW of renewable energy capacity, and represents ~ 25% of the overall installed power capacity, providing a great opportunity for the expansion of green data centres.

The country is targeting about 450 Gigawatt (GW) of installed renewable energy capacity by 2030 - about 280 GW (over 60%) is expected from solar.

Installed renewable power-generation capacity has increased at a fast pace over the past few years, posting a CaGr of 15.51% between FY16 and FY21. India had 94.4 GW of renewable energy capacity in FY21.

From April 2015 to February 2021, India has added 117.9 GW of power generation capacity, including 64.5 GW of conventional source and 53.4 GW from renewable sources.

By December 2019, 15,100 megawatts (MW) of wind power projects were issued, of which, projects of 12,162.50 MW capacity have already been awarded2. Power generation from renewable energy sources in India reached 127.01 billion units (BU) in FY20.

With a potential capacity of 363 GW and with policies focused on the renewable energy sector, Northern India is expected to become the hub for renewable energy in India.

https://www.ibef.org/industry/renewable-ener- gy.aspx

Global Solar Overview

The global solar energy market is expected to grow at a compound annual growth rate of 5.12% over the forecast period to reach a market size of US$267.747 billion in 2026 from US$68.579 billion in 2019.

The global solar energy market is growing at a significant rate in the recent years and have been expected to increase more in the upcoming years. The major driving forces for such a growth in this market are increasing concerns of the economies towards the environment sustainability and decarbonization making the power energy companies to improvise their technology towards renewable sources in an efficient way. To support this, governments are also providing the rebate policies to further promote the renewable energy market. Solar energy comes up as third renewable source of energy across the world, and one of the reliable sources from household consumptions point of view. People can have solar energy systems at their rooftops and though, the main concern for the general people to use the cost and the space of plantation of the solar energy.

In the upcoming years, all the countries have potential growth of the solar energy, Germany, India, and US are having the significant potential to grow. India is planning to increase the dependency of electricity more on the renewable sources to 55% by 2030 as the demand has been projected to increase by 15280 TWH by 2040 and investments will increase to US$ 500 billion by 2028 (source: IBEF). It can be noticed that there may be a growth of the PV solar plants in the coming period due to cost-competitiveness. While US has accounted for the 8300 MW installed capacity in 43 states in 2019, representing over 70% of all the commercial solar capacity installed in the US (source: SEIA)). The top companies of the US are also shifting their technology towards the solar energy, having Apple and Amazon having the highest installed capacity among them

https://www.businesswire.com/news/ home/20210406005799/en/Global-Solar-Ener- gy-Market-2021-to-2026---by-Product-Type-Ar- ea-Technology-Application-and-Geogra- phy—ResearchAndMarkets.com

Indian Solar Sector Overview

Due to its favourable location in the solar belt (400 S to 400 N), India is one of the best recipients of solar energy with abundant availability. Growth in solar power installed capacity is expected to surpass the installed capacity of wind power, reaching 114 GW by 2022. A total of 38 solar parks, with >25 GW of combined capacity, were approved in India until September 2020. India stands 5th among countries with a maximum installed capacity of solar rooftop installations. Gujarat, Maharashtra, Rajasthan and Tamil Nadu account for 53.6 % of the solar rooftop installations in India, as of January 2021.

Government Initiatives

• In June 2021, Indian Renewable Energy Development Agency Ltd. (IREDA) has invited bids from solar module manufacturers for setting up solar manufacturing units under the central governments Rs. 4,500 crore (US$ 616.76 million) Production Linked Incentive (PLI) scheme.

• In June 2021, the Competition Commission of India (CCI) approved ReNew Power to exchange equity shareholding by its existing shareholders with shares of ReNew Global. Along with this, the CCI also approved a reverse triangular merger of ReNew Globals subsidiary with RMG II.

• In April 2021, the Central Electricity Authority (CEA) and CEEWs Centre for Energy Finance (CEEW-CEF) jointly launched the India Renewables Dashboard that provides detailed operational information on renewable energy (RE) projects in India.

• In April 2021, the Ministry of Power (MoP) released the draft National Electricity Policy (NEP) 2021 and has invited suggestions from all stakeholders such as Central Public Sector Undertakings, Solar Energy Corporation of India, power transmission companies, financial institutions like Reserve Bank of India, Indian Renewable Energy Development Agency, HDFC Bank, ICICI Bank, industrial, solar, and wind associations, and state governments.

• In March 2021, the Union Cabinet approved a Memorandum of Understanding (MoU) in the field of renewable energy cooperation between India and the French Republic.

• In March 2021, Haryana announced a scheme with a 40% subsidy for a 3 KW plant in homes, in accordance with the Ministry of New and Renewable Energys guidelines, to encourage solar energy in the state. For solar systems of 4-10 KW, a 20% subsidy would be available for installation from specified companies.

• In March 2021, India introduced Gram Uja- la, an ambitious programme to include the worlds cheapest LED bulbs in rural areas for Rs. 10 (US$ 0.14), advancing its climate change policy and bolstering its self-reliance credentials.

• In the Union Budget 2021-22, Ministry for New and Renewable Energy was allocated Rs. 5,753 crore (US$ 788.45 million) and Rs. 300 crore (US$ 41.12 million) for the ‘Green Energy Corridor scheme.

• Under Union Budget 2021-22, the government has provided an additional capital infusion of Rs. 1,000 crore (US$ 137.04 million) to Solar Energy Corporation of India (SECI) and Rs. 1,500 crore (US$ 205.57 million) to Indian Renewable Energy Development Agency.

• To encourage domestic production, customs duty on solar inverters has been increased from 5% to 20%, and on solar lanterns from 5% to 15%.

• In November 2020, Ladakh got the largest solar power project set-up under the central governments ‘Make in India initiative at Leh Indian Air Force Station with a capacity of 1.5 MW.

• In November 2020, the government announced production-linked incentive (PLI) scheme worth Rs. 4,500 crore (US$ 610.23 million) for high-efficiency solar PV modules manufacturing over a five-year period. On November 17, Energy Efficiency Services Limited (EESL), a joint venture of PSUs under the Ministry of Power and the Department of New & Renewable Energy (DNRE), Goa, signed a memorandum of understanding to discuss roll-out of Indias first Convergence Project in the state. In October 2020, the government announced a plan to set up an inter-ministerial committee under NITI Aayog to forefront research and study on energy modelling. This, along with a steering committee, will serve the India Energy Modelling Forum (IEMF), which was jointly launched by NITI Aayog and the United States Agency for International Development (USAID). India plans to add 30 GW of renewable energy capacity along a desert on its western border such as Gujarat and Rajasthan. Delhi Government decided to shut down thermal power plant in Rajghat and develop it into 5,000 KW solar park. The Government of India has announced plans to implement a US$ 238 million National Mission on advanced ultra-supercritical technologies for cleaner coal utilisation. Indian Railways is taking increased efforts through sustained energy efficient measures and maximum use of clean fuel to cut down emission level by 33% by 2030. Renewable-Energy-May-2021.pdf

Opportunities

Huge Untapped Potential- India is estimated to have renewable energy potential of 900 GW from commercially exploitable sources - Solar energy: 750 GW; Wind power1: 102 GW; Bio-energy: 25 GW; and Small Hydro: 20 GW. Recognizing this potential, a target of 175 GW of renewable energy capacity by 2022 has been fixed. Renewable energy capacity is estimated to be 523 GW (including 73 GW from Hydro) by 2030. In India, there is an estimated potential of about 8,000 MW of tidal energy. Around 15,000 MW of wind-solar hybrid capacity is expected to be added between 2020-25

Rising Power Demand- Indias power demand has been rising at a fast pace. It is estimated that India will require an additional power supply capacity of 450 GW by 2034. The peak power demand of the country reached 183.80 GW in FY20. It is estimated that this demand will rise to 295 GW by 2021-22 and 690 GW by 2035-36. India has an electricity-GDP elasticity ratio of 0.8. 7% growth in energy supply will be required if India is to grow at 8%. This shows that electricity will continue to remain a key input in Indias GDP growth.

Source- IBEF Solar Parks India

The Ministry of New and Renewable Energy (MNRE) launched the Development of Solar Parks and Ultra Mega Solar Power Projects scheme in December 2014. At least 25 Solar Parks and Ultra Mega Solar Power Projects with over 20,000 MW (20 GW) total installed solar power capacity were to be set up under this scheme, within a span of five years starting 2014-15. In 2017, the government revised these targets upwards, from 20,000 MW to 40,000 MW, to be met by 2021-22. The goal of the scheme is to facilitate and accelerate the installation of grid connected solar power projects for electricity generation on a large scale. The scheme intends to extend support to Indian states and union territories in setting up solar parks across the country and creating the requisite infrastructure to gradually transition to clean energy.

As of December 2020, 42 solar parks with a cumulative 26.8 GW had been approved. With an investment of USD 2.5 Bn, a 2 GW capacity solar park has been set up in Karnataka. Bhadla Solar Park in Rajasthan with a capacity of 2.2 GW was commissioned in January 2020. In July 2020, Prime Minister Narendra Modi inaugurated the Rewa solar power project in Madhya Pradesh that has a generation capacity of 750 MW. Later in December 2020, the PM also inaugurated Indias largest renewable energy generation park in Kutch, Gujarat that has a generation capacity of 30 GW.

Source-Rising Solar Sector.pdf

India Rooftop Solar Sector

India has set an ambitious path to achieve 100 GW of its energy capacity by 2022, through grid-connected solar energy, out of which 40 GW is expected to come from rooftop solar installations

Over the period of 2020-2025, the Indian rooftop solar market is expected to grow at a Compounded Annual Growth Rate (CAGR) of more than 25 per cent with factors such as rising environmental concerns, favourable government policies, incentives and tax benefits for solar panel installation, and high cost of grid expansion especially in rural areas. Additionally, increased government focus and advancement in technology has led to a reduction in the cost for manufacturing solar panels, while increased efficiency has also been a major factor for the growth of the Indian rooftop solar market.

The rooftop solar PV systems provide multi fold benefits:

• Highly adaptable for use on vacant rooftops due to the modular nature of the solar PV. Reduced land and interconnection costs.

• Higher tariffs for the developer due to increasing commercial and industrial tariffs lead to increased profitability.

• Assists Distribution Companies (DISCOMs) by reducing the peak demand during daytime. Decreases Transmission and Distribution (T&D) losses since the power is consumed at the point of generation. More than 10,000 Mega Unit (MU) of electricity will be saved through avoidance of T&D losses in 2022 alone if 40 GW rooftop PV is achieved.

• Commercial benefits in avoiding investments in transmission system.

• Offers the benefits of modern electricity services to households with no access to electricity, reduces electricity costs on islands and in other remote locations that are de pendent on oil-fired generation.

• Enables residents and small businesses to generate their own electricity

Within the solar rooftop industry, commercial and industrial systems remain the largest segment because their electricity tariffs are relatively higher than other sectors and they also have a relatively stable load profile during the day that can enable larger savings on electricity bills, depending on the policy scheme in place. However, considering the targets committed by India including at the international forums with respect to rooftop solar photovoltaic plants, there is still tremendous scope and opportunity presented by the segment.

Source-Rising Solar Sector.pdf

EPC Business

The India power EPC market is expected to rise at a CAGR of more than 3% during the forecast period of 2020-2025. Factors such as the increase in industrial operations and several government initiatives to provide electricity to all people in the country are likely to drive the India power EPC market. However, the low domestic investments and slow processing of projects are expected to restrain the India power EPC market. The government initiative to increase renewable energy share is likely going to create several opportunities for the India power EPC market in the future. The increasing power-related projects in the country are expected to drive the India power EPC market during the forecast period.

Source- India Power EPC Market 2021 - 26 Industry Share, Size, Growth - Mordor Intelligence

O&M Business

As Indias solar footprint has grown, from a tentative 3.7 GW in 2015 to over 40 GW now, a little appreciated, but growing opportunity is finally getting its place in the sun too. The Solar Operations and Maintainance (O&M) business. A $4 billion business worldwide in 2019, it is set to be a $9 billion business by 2024.For firms in India, the new opportunities in Solar O&M are real. Not only is there a growing domestic market, but learnings here can also potentially open upopportuni- ties globally. That is because, like manyoth- er businesses linked to the solar sector, the focus here is on lowering costs and technology upgrades. Of course, like any new opportunity, the players are also many, including small local players. States like Rajasthan and Gujarat, where a lot of large projects are coming up now, have an especially high number of local players vying to win O&M work, making it a very competitive business indeed.

Source - Solar O&M Gets Set For The Big League In India - Saur Energy International

Transmission

At present, inter-state transmission is the strongest link in the electricity supply chain. One-third of the power generated can now be transferred across state boundaries and a minuscule two percent is traded internationally with Bhutan (imports), Nepal (export) and Bangladesh (export), with small volumes of trade possible with Myanmar.

Power transferability and grid security are critical. This became evident during the blackout of 30-31 July 2012 in India, when 22 states were deprived of electricity for two days due to grid instability. In February 2021, a cold weather-stress-induced power blackout in Texas, an islanded grid with no external linkages, left millions of homes in the dark for four days. The potential cost was above US$125 billion, even as generators earned billions with the traded price of power shooting up to US$ 9 (approximately INR 700) per kWh. In the context of RE, a strong grid is even more significant, since RE—the energy of the future—is clustered in specific locations. With a mere six out of 30 states accounting for 90 percent of the registered solar and wind projects, strong grid connectivity is essential to efficiently navigating future "green" energy pathways and achieving the target of 450 GW RE generation capacity (including hydro) by 2030. RE-intensive areas need to import power or set up fossil fuel generators to cover the intra-day and seasonal gaps in RE availability. This constraint will be less pronounced once battery-based storage systems become available; however, such a development is at least a decade away. https://www.orfonline.org/research/na- tional-electricity-policy-2021-making-indi- as-power-sector-future-ready/

Segmental Performance-

Ujaas Energy has three segments of business Wise Solar Power Plant Operation, Manufacturing & Sale of Solar Power Systems and E-Vehicles. In fiscal 2016, 2017, 2018, 2019 & 2020 revenue from solar power plant operation was INR 2,995.27 lakhs, INR 4,285.67 lakhs, INR 3,155.84 lakhs, INR 4,507.40 lakhs & INR 2,918.10 lakhs respectively. Further, in Fiscal 2016, 2017, 2018, 2019 & 2020 revenue from manufacturing and sale of solar power system was INR 24,716.45 lakhs, INR 44,349.11 lakhs, INR 30,261.47 lakhs, INR 11,325.15 Lakhs INR & 1,818.82 lakhs respectively and in Fiscal 2020 revenue from E-Vehicles was INR 598.44 lakhs.

Outlook-

It has been estimated that renewables will comprise 49% of Indias power generation by 2040. Over the last few years there has been an increase in percentage contribution of renewable energy to total installed capacity. In 2013-14, the contribution was 12.92%, which increased to 23.51% by March 2020. India aims to achieve a total of 175 GW of installed renewable energy capacity by 2022. Replacing coal plants with renewable sources is expected to save India Rs. 54,000 crore (US$ 8.4 billion) annually due to reduced power costs. About 5,000 compressed bio-gas plants will be set up across India by 2023. In November 2020, the Airports Authority of India (AAI) signed an MoU with NTPC Vidyut Vyapar Nigam, a NTPC subsidiary to promote use of electric vehicles and set up solar power plants at its airports. According to the analytics firm British Business Energy, India ranked 3rd globally in terms of its renewable energy investments and plans in 2020. In March 2021, the European Union joined the Coalition for Disaster Resilient Infrastructure (CDRI), an India-led initiative aimed at ensuring long-term development while addressing the climate changes adverse effects. In March 2021, India and the US agreed to restructure their strategic energy partnership to concentrate on cleaner energy sectors including biofuels and hydrogen production

Risk and Concerns-

While the company faces traditional business risks such as un—anticipated labour costs, market risks such as interest rates, operational risks such ‘as supplier/distrib- utor problems and execution challenges and changes in government regulations, no major risks are foreseen. But in FY20 the company has faced difficulty due to ambiguity of tax rates applicable to Engineering procurement & construction (EPC) Contacts for Solar Power plants under GST Act, many retrospective changes in charges of Open Access, change in Net metering laws in Rooftop projects and many more.

The company is at the forefront over seeking clarity from various ministers and tribunals both at the centre and the state level. Another risk that the company and the overall sector faces is the fear of anti-dumping duty and safeguard duties on solar imports.

Additionally, the company continuously monitors business and operational risks through an efficient risk management system. All key functions and divisions are independently responsible to monitor risks associated within their respective areas of operations such as production, insurance, legal and other issues like health, safety and environment

Internal Control Systems and their Adequacy

The Company has an effective internal control and risk mitigation system, which is constantly assessed and strengthened with new/revised standard operating procedures. The Companys internal control system is commensurate with its size, scale and complexities of its operations. The internal audit is entrusted to M/s S.K Malani & Co. (FRN: 159090W), a reputed firm of Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism The Audit. Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. To maintain its objectivity and independence, the Internal Audit function reports to the Chairperson of the Audit Committee.

Quality Management Systems

Your company has successfully implemented SAP Business solution as an accounting software. Company has installed different modules of SAP like Fl (Finance), MM (Material Management,), SD (Sales & Distribution), PS (Project System), QC (Quality Control), and HR (Human Resource). Further the company continued to be certified under ISO: 9001:2008 by International Organization for Standardization the Quality Management System in the Company is well defined and is well in place. This will enable your company to meet the challenges related with Information systems, Controls, Planning and Quality.

Cautionary Statement

Statement made in the management discussion and analysis report as regards the expectations or predictions are forward looking statements within the meaning of applicable Laws and Regulations. Actual performance may deviate from the explicit or implicit expectations.