TVS Electronics Ltd Management Discussions

<dhhead-MANAGEMENT DISCUSSION & ANALYSIS</dhhead-

ECONOMIC OVERVIEW

GLOBAL ECONOMY

Despite facing challenges, the global economy has shown noteworthy resilience, characterised by steady growth and a rapid slowdown in inflation. This journey has been marked by events such as postpandemic supply chain disruptions, and an energy and food crisis triggered by the Russia-Ukraine war. A surge in inflation was also experienced, which was followed by synchronised monetary policy tightening.

Global growth, which reached 3.2% in 2023, is forecasted to remain steady through 2024 and 2025. However, this falls short of the 3.8% historical average, owing to restrained monetary policies, diminished fiscal aid, and sluggish productivity growth. Global headline inflation is expected to moderate, decreasing from an annual average of 6.8% in 2023 to 5.9% in 2024 and further to 4.5% in 2025. This decline can be attributed to a more front-loaded decrease in advanced economies. Notably, inflation is anticipated to return to near pre-pandemic levels sooner in advanced economies than in emerging markets and developing economies.

Advanced economies are poised for a slight uptick, primarily driven by significant recovery in the Euro Zone. Projections indicate that growth in these economies would climb from 1.6% in 2023 to 1.7% in 2024 and 1.8% in 2025. In contrast, emerging markets and developing economies are expected to sustain stable growth at 4.2% during 2024 and 2025. However, certain regional disparities exist, with growth moderation in Asia counterbalanced by growth in the Middle East, Central Asia, and subSaharan Africa.

OUTLOOK

The global economic environment is currently balanced, though some uncertainties remain. Geopolitical tensions, such as those in Ukraine, Gaza, Iran and Israel, could disrupt Middle Eastern energy exports, leading to higher crude oil prices.

This, in turn, could increase the likelihood of higher interest rates and lower asset values. The different rates of price decreases in major economies could cause currency fluctuations, impacting financial sectors. Altogether, the high interest rates, household debt levels, and adjustments to fixed-rate mortgages could strain financial stability.

Chinas economic expansion is at risk, as the country is yet to devise comprehensive solutions to its property sector issues. This is also likely to affect its trading partners. Moreover, high Government debt in several economies, including the United States and China, could require significant fiscal adjustments, eroding confidence and hindering efforts to address climate change. Furthermore, geoeconomic fragmentation could hinder supply- side dynamics. While implementing more relaxed fiscal policies could temporarily boost economic activity,

it could require more significant adjustments later.

The role of Central banks is essential as the global economy moves toward a soft landing, requiring careful management of inflation. Additionally, there is an urgent need to refocus on medium-term fiscal consolidation to create room for critical investments and ensure debt sustainability. Tailored policy responses, along with reforms to enhance supply, are

also essential to address inflation, reduce debt, promote higher growth, and narrow income gaps. Multilateral cooperation is crucial for addressing challenges such as geoeconomic fragmentation, climate change, and debt restructuring. Ultimately, it can promote sustainable and inclusive economic recovery and a brighter future.

(Source: IMF Blogs: Global Economy remains Resilient despite Uneven Growth, Challenges Ahead)

INDIAN ECONOMY

Indias economy has demonstrated remarkable resilience and sustained growth over the past three years, despite facing several global economic challenges. This strong path has been supported by a mix of strict policy measures and regulations, along with the gradual recovery of the private sector. Moving ahead, the country is positioned for further economic progress. This advancement is likely to be driven by significant investments in emerging sectors, ongoing Government expenditures, and efficiency improvements due to advancements in digitalisation and infrastructure.

In 2023-24, Indias economic growth story has been one of strong expansion, achieving an impressive growth rate of 7.6%, surpassing earlier projections. However, looking ahead to the next fiscal year, there is a cautious note, with GDP growth expected to ease to 6.8%. This anticipated slowdown is a result of higher interest rates and a restrictive fiscal policy aimed at reducing the deficit to 5.1% of GDP. Despite these challenges, Indias economic vitality is supported by various factors. These determinants include the strengthening of consumer buying power due to lower inflation, a thriving start-up culture, an anticipated strong agricultural output, and a resurgence in private capital spending. Additionally, the Governments efforts to boost rural incomes and increase infrastructure spending have reinforced Indias position as the worlds fastest-growing major economy.

In 2023-24, the Wholesale Price Index (WPI) inflation stood at (0.70) %, a significant drop from the 6.52% recorded in 2022-23. This sharp decline played a crucial role in boosting the profitability of Indian corporations, as they benefited from considerably lower input costs during the year. Additionally, Indias Consumer Price Index (CPI) inflation eased to 4.85% in March 2024, down from 5.09% in February 2024. The government aims to further moderate CPI inflation further and maintain it within a specified target range consistently. Achieving this target is crucial to ensuring optimal interest rates and promoting overall economic stability.

Source: Press Information Bureau - Indian Economy Estimates

DIGITAL INDIA

The Digital India programme, launched by the Government of India, aims to transform the country into a digitally empowered society and a knowledge-based economy. The programme focusses on ensuring digital access, inclusion, and empowerment, and bridging the digital divide. Its ultimate goal is to utilise digital technologies to enhance the quality of life, boost Indias digital economy, create investment and job opportunities, and build digital technological capabilities within the country.

To achieve the vision of a digital nation, India has developed a comprehensive Digital Public Infrastructure. This infrastructure serves as the backbone for progress and includes initiatives such as FasTag, GST, and eWaybill. The introduction of these measures has made digital payments ubiquitous and has significantly reduced border waiting times. DigiLocker, another crucial component, has revolutionised transactions by eliminating the need for physical paperwork.

One of the key innovations in Indias Digital Public Infrastructure is the Account Aggregator, which allows users to access and control their financial data. By blending elements from both the public and private sectors, these initiatives contribute to making the Government more efficient. Indias efforts in building population-scale APIs and open networks set it apart as a global leader in todays digitally transforming society. These initiatives are crucial steps towards achieving the vision of a digitally empowered India.

ELECTRONICS MANUFACTURING

The electronics manufacturing industry is experiencing rapid growth globally. Alongside, India is actively promoting and developing its electronics manufacturing cluster. Currently, the country holds a 3% share in the global production of electronics. This contribution showcases Indias potential and commitment to becoming a significant player in the industry. Notably, the Government has introduced several key initiatives to establish India as a global hub for Electronics System Design and Manufacturing (ESDM). These include the Production Linked Incentive Scheme (PLI) for large- scale electronics manufacturing, the Production Linked Incentive Scheme (PLI) for IT hardware, the Scheme for Promotion of Manufacturing of Electronic Components and Semiconductors (SPECS), and the Modified Electronics Manufacturing Clusters Scheme (EMC 2.0). The schemes aim to incentivise and promote the manufacturing of electronics and related components in India. In the process, they are likely to boost the countrys competitiveness in the global electronics market.

(Source: Times of India)

OUTLOOK

Looking ahead, the Indian economy is set to achieve greater heights in the coming years. Projections suggest that the economy will reach the USD 7 trillion mark by 2031, solidifying its position as the third-largest economy in the world. This growth is likely to be propelled by enhancements in capital and productivity, facilitated by a comprehensive integration of digital and physical infrastructure. Furthermore, the manufacturing sector is anticipated to undergo a significant resurgence. The sector is likely to benefit from global opportunities, supportive domestic policies, and a focus on transitioning to green energy.

The future holds possibilities of strong growth in capital expenditure, propelled by industrial strength and effective infrastructure development. This positive trajectory is likely to be supported by factors such as the robust financial health of Indian companies, consistent revenue growth, and a favourable outlook for commodity prices. Additionally, the Governments Production Linked Incentive (PLI) scheme aims to enhance Indias manufacturing capabilities on the global stage. The countrys strong banking sector and innovative financing options are likely to catalyse this progress.

India has been actively positioning itself as a reliable alternative to Chinese manufacturing in Asia. The ‘Make in India campaign aims to elevate countrys status as a global manufacturing hub and attract multinational companies to produce in India. The Atmanirbhar Bharat campaign, initiated in 2020, further emphasises a self-reliant approach and reduced dependence on imports. Recent global trends have seen a shift away from China in key markets such as smartphones and semiconductors. These trends present opportunities for India to capture significant supply chain segments. Aligning with this strategy, the country is reportedly pursuing the ‘plus-one strategy to attract businesses looking to diversify their manufacturing bases. With a sizable labour force and domestic market as its strengths, India is being seen as a natural partner for Western nations. Furthermore, the Government is striving to make it easier for businesses to establish their manufacturing operations in India. As a result, several global brands are relocating their manufacturing sections to India to mitigate the risk of overdependence on China.

INDUSTRY OVERVIEW

IT SECTOR OVERVIEW

The Indian economy has received a significant boost from the Information Technology (IT) sector, which has emerged as a key growth driver. The sector has made substantial contributions to the countrys GDP and public welfare. With the widespread integration of innovative digital application: across various sectors, India is strategically poised to enter the next phase of growth in its IT revolution. In 2023, the country was ranked 40th in the GII rankings, reflecting its growing prominence and capabilities in innovation on the global stage.

According to the National Association of Software and Service Companies (NASSCOM), the growth rate of Indias technology sector decelerated to 3.8% in 2023-24, reaching a value of USD 254 billion. This represents a slowdown compared to 2022-23, when the industry experienced a growth of 8.4%, reaching USD 245 billion. The deceleration in growth was primarily stimulated by macroeconomic challenges, uncertain geopolitical tensions, and cautious technology spending by clients, resulting in delays in deal closures. Over the past several quarters, certain technologi firms are experiencing weakened or subdued business due to the economic slowdown western markets such as North America and Europe. These firms are software service exporters, which derive a significant portion of their revenue (around 57-58%) from the western markets.

The industry saw a net addition of ~60,000 employees in 2023-24, marking a significant decrease from the 2.90 lakhs added during the previous year. The cautious demand environment prompted companies to focus on improving workforce utilisation and transitioning to a more just-in-time hiring approach. However, there remains a strong emphasis on digital skills, with AI, Cloud, Data, and

Cybersecurity emerging as the most sought-after skills in the industry in 2023.

Even amid continuing macroeconomic headwinds, there are significant tailwinds as well. These include a better-than- expected performance of the ER&D (engineering, research, and development) sector, and the increasing prominence of global capability centres (GCCs) in India. Notably, the latter are becoming the preferred hub for many companies.

India is witnessing a transformative shift with regard to Global Capability Centres. These Centres are operating with a strong focus on digital capabilities such as AI/ML, analytics, and cybersecurity, driving unprecedented growth. As businesses aim to harness Indias skilled workforce and favourable economic conditions, the GCC sector, currently valued at USD 46 billion, is forecast to surge to USD 110 billion by 2030. This growth trajectory is expected to generate employment opportunities for over 4.5 million professionals across 2,400 Global Capability Centers.

IT PERIPHERALS MARKET

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

As for mobile phone accessories, these encompass a range of supplementary devices and equipment designed to enhance the functionality of mobile phones. The items within this segment include chargers, headphones, earphones, mobile covers, selfie sticks, pouches, and leather cases, among others. In recent years, there has been an emergence 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. By the end of 2024, the Indian mobile accessories market is projected to reach USD 3.54 billion. A noteworthy factor expected to drive this growth is a rise in the young population during the forecast period.

The desktop category experienced a 6.7% year-on-year (Y-o-Y) growth from 2022 to 2023. On the other hand, the notebooks and workstations categories registered a decline of 11.1% Y-o-Y and 14% Y-o-Y, respectively. In the consumer segment, there was a decrease in growth by 3.1%, while the commercial segment saw a slump of 9.7% due to the reduced demand from enterprises. However, the education sector recorded a strong growth of 80% in the education sector and 18% in Government demand.

Despite the overall decline in 2023, the market was ahead of pre-Covid shipments, indicating stability in the consumer segment. Reduced consumer demand led to a significant correction in shipments in the second half of 2022 and the first half of 2023. However, the decision on import regulations, improving market sentiment, and an aggressive push from vendors are expected to drive market recovery in 2024.

(Source: International Data Corporation)

GROWTH DRIVERS

GROWING MIDDLE-CLASS POPULATION

India is currently experiencing a digital revolution, which has led to a significant increase in the usage of electronic devices. The expanding middle-class population and rising disposable incomes have been key drivers of this surge in consumer demand. Projections suggest that Indias middle class will reach 583 million individuals by 2025, representing over 40% of the population. Additionally, there has been a noticeable increase in the percentage of middle-class Indians aged 25 or younger pursuing higher education. It has risen by more than 60% in the past decade and is expected to continue growing. This expanding middle class has contributed to increased economic consumption across various sectors, including electronic products and services

INDIA AS A PROSPECTIVE INVESTMENT DESTINATION

India has emerged as a prominent global investment hub, attracting investors from around the world. The data annotation market in India is expected to experience significant growth, reaching a value of USD 7 billion by 2030. This projected development is likely to driven by the rising domestic demand for artificial intelligence. In addition, the Indian software industry is set to reach USD 100 billion by 2025. These factors collectively indicate a positive outlook for the IT and IT peripherals market in India in the coming years.

RISING URBANISATION

The increasing urbanisation of India has resulted in a growing demand for electronic goods. This has been primarily due to the higher disposable incomes of urban consumers and a greater willingness to adopt new technologies. Notably, the countrys urbanisation rate is projected to reach 37-38% by 2025, leading to a significant increase in the demand for IT and IT peripherals.

COST ADVANTAGE

One of the key drivers of growth in the Indian IT industry is its cost advantage. Indian IT firms can provide services at more competitive rates compared to their counterparts in developed countries. This advantage has made India a major destination for businesses worldwide looking to outsource their IT services.

INCREASING ADOPTION OF DIGITAL TOOLS

Consumers have significantly shifted towards online channels, prompting companies and industries to adapt accordingly. The rise of digital tools, from smartphones and tablets to cloud computing and artificial intelligence, has empowered individuals to connect, collaborate, and share information globally. This widespread digitisation has helped break down barriers and foster innovation. According to a McKinsey report, around 500 million Indians are connected to the internet, with over 100 million engaging in online transactions. On the whole, India has witnessed one of the fastest accelerations in digital adoption globally, which has further fuelled the growth of the IT sector in the country.

ROBUST INFRASTRUCTURE

India has made substantial investments into developing a robust IT infrastructure, which includes technology parks, software development centres, and world-class connectivity. This infrastructure acts as a catalyst for the growth of the IT industry, creating an enabling environment for businesses to thrive and expand.

GOVERNMENT INITIATIVES

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

The Government has been actively promoting its ‘Make in India initiative, encouraging consumer durable brands to become 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 several ministries, including Railways and Roadways, to facilitate integrated planning and coordinated implementation of infrastructure connectivity projects. The approach aims to eliminate departmental silos and improve overall infrastructure development in the country

The Next Generation Incubation Scheme (NGIS) is a futuristic and comprehensive incubation scheme entrusted by the Ministry of Electronics and Information Technology (MeitY) to the Software Technology Parks of India (STPI) for implementation. NGIS aims to drive the rise of India as a Software Product Nation by making the country a global player in the development, production, and supply of innovative, efficient, and secure software products, including embedded software

The National Deep Tech Startup Policy (NDTSP), introduced recently, acts as a roadmap for nurturing deep tech startups in India. It aims to provide a conducive environment for the growth of startups focussed on cutting-edge technologies such as artificial intelligence, machine learning, blockchain, and advanced manufacturing The policy focusses on addressing key challenges faced by deep tech startups, including access to funding, mentorship, and market access. It also aims to foster collaboration between the startups, academia, and the industry to drive innovation and create a thriving ecosystem for deep tech startups in India.

The PLI Scheme 2.0 for IT Hardware aims to enhance the manufacturing ecosystem by promoting the local production of components and sub-assemblies. It provides applicants with more flexibility and time to develop the supply chain within the country. The scheme is designed to incentivise growth through incremental sales and investment thresholds. Additionally, it includes incentives for semiconductor design, IC manufacturing, and packaging, further boosting the IT hardware sector.

BANKING & FINANCE INDUSTRY

The Indian banking sector has undergone substantial growth and transformation in the past few years, emerging as a key driver of the nations economy. Changing consumer behaviours and the rapid digitalisation have been instrumental in shaping the sectors progress. Coupled with these trends, Government initiatives such as the Pradhan Mantri Jan Dhan Yojana and the Digital India campaign have significantly boosted financial inclusion for all citizens.

With regard to enhancing the scalability and efficiency of the banking sector, there have been significant efforts to embrace emerging technologies. Banks have adopted digital platforms, mobile banking, and internet banking services, offering customers convenient ways to conduct financial transactions. Additionally, the sector has harnessed technologies like artificial intelligence, machine

RETAIL INDUSTRY

The retail market in India has undergone a significant transformation and has experienced tremendous growth over the last decade. Currently, India is considered one of the best countries to invest in the retail space due to several factors. These include having the second-largest population in the world, a rising middle-income class consisting of approximately 158 million households, increasing urbanisation, a growing number of connected rural consumers, and increased discretionary spending among consumers. As a result, the country has emerged as an attractive market for retailers looking to expand their operations. It is expected that the Indian retail market will reach USD 1.1 trillion by 2027 and USD 2 trillion by 2032, registering a CAGR of 25%. Currently, India has the fourth- largest retail market in the world.

SHIPPING & LOGISTICS INDUSTRY

The shipping and logistics industry plays a crucial role in the Indian economy, making a significant contribution to the countrys GDP. According to a report by LogiMAT India, the countrys shopping and logistics market is projected to grow at a rate of 8.8% annually from 2024-2029. From a market size of USD 317.26 billion in 2024, it is projected to reach USD 484.43 billion in 2029. This growth is likely to result from several technological advancements in the industry.

(Source: Economic Times)

GOVERNMENT

Public Sector Undertakings (PSUs) that encompass public services and enterprises delivering benefits to society, play a vital role in the Indian economy. These entities primarily focus on serving the general public, fostering economic development through job creation, and contributing to the countrys GDP. In the Interim Union Budget for 2024-25, a significant revision has taken place to the divestment targets for 2024-25 and 2025-26. The divestment target for 2024-25 has been scaled down from the previously budgeted 51,000 crore to 30,000 crore, reflecting challenges faced in meeting the initial goal. Furthermore, the divestment target for 2024-25 has been set at 50,000 crore.

SOLAR ENERGY

India stands out as one of the most attractive destinations for solar energy globally, thanks to its vast landmass, the seventh-largest in the world, and a potential of 748 GW for solar energy. The industrialisation in India is rapidly expanding, with energy demands doubling approximately every 4-5 years.

India has set an ambitious target of achieving 500 GW of renewable energy (RE) installed capacity, with 280 GW planned specifically for solar energy. Both the Union and State Governments are actively promoting solar investments by incentivizing developers through various schemes such as subsidies, viability gap funding, central financial assistance, tax rebates, and attractive policies. Harnessing solar energy will contribute significantly to long-term sustainability, reduce carbon emissions, and climate control, provide affordable power, and promote localized generation, thereby avoiding transmission losses.

ELECTRIC VEHICLES

The electric vehicle (EV) industry in India is experiencing rapid expansion, propelled by several factors. Firstly, environmental concerns regarding air pollution have led to the increased interest in electric vehicles as a cleaner alternative to traditional fossil fuel vehicles. The Government has also provided several tax incentives such as subsidies and tax benefits to encourage the adoption of electric vehicles. Additionally, declining battery costs have made electric vehicles more affordable and attractive to consumers. These factors, combined together, have contributed to the rapid growth of Indias Electric Vehicle industry. Currently, the country is the third- largest automobile market in the world. EV sales account

for around 3-5% of the market, making it the fastest-growing electric vehicle market globally. In 2023, the sales of electric vehicles grew by approximately 49% year-on-year (Y-o-Y) to 1.53 lakh units, with two-wheelers leading the market. Moving ahead, for 2030, the Niti Aayog has set a target to make electric vehicles (EVs) account for 30% of the total vehicle sales in India by 2030. The Indian Government is focussing on expanding and strengthening the e-vehicle ecosystem by supporting manufacturing and charging infrastructure. The Government also aims to encourage greater adoption of e-buses for public transport networks through a payment security mechanism.

COMPANY OVERVIEW

TVS Electronics Limited (‘TVS-E or ‘the Company) is a reputable player in the IT peripherals and consumer electronics market. Since its inception in 1986, the Company has made significant progress, and currently offers a wide range of IT & electronics products and solutions. It has established a strong presence in three main business verticals, namely products and solutions, customer support services and electronics manufacturing services.

TVS Electronics has an extensive portfolio covering the entire lifecycle management process, including product design, manufacturing, customer support services, warranty management, and end-of-life services. By offering end-to-end IT and electronics solutions, TVS-E aims to meet its customers diverse needs, ensuring a seamless experience throughout their journey.

The Products & Solutions Group (PSG) is responsible for designing, manufacturing, assembling, marketing, selling, and servicing a variety of products. These include dot matrix printers, thermal receipt printers, label printers, mobile printers, mechanical keyboards, membrane keyboards, mouse, barcode scanners, currency counters, touch POS systems, handheld devices, and electronic cash registers, among others.

Furthermore, the Customer Support Services (CSS) segment of TVS Electronics caters to the customer assistance needs of both original equipment manufacturers (OEMs) and end-customers. This segment encompasses services like break-fix solutions, repair engineering, installation assistance, product demonstrations, protection plans, IT infrastructure management, remote technical support, call centre services, green energy solutions and e-waste management, among others.

Additionally, TVS Electronics provides comprehensive Electronics Manufacturing Services (EMS), including product design, development, end-to-end manufacturing, sourcing, Printed Circuit Board Assembly (PCBA), box build, testing, logistics, and aftersales service.

TVS-E emphasises technological advancements and consistently invests in upgrading its technology infrastructure while developing innovative products and services. The Company also boasts a robust distribution network comprising [ ] sales partners, 500 service partners, and 345+ walk-in stores, helping it serve customers effectively in over 18500 postal codes across India.

BUSINESS SEGMEN OVERVIEW PRODUCTS & SOLUTIONS GROUP (PSG)

Within this vertical, the Company primarily offers four product categories, which include:

Point-of-Transaction Hardware - Invoice and Print Bills, Inventories and Sales Management, Reports & Tax/GST Reconciliation, Payments along with the Retail Billing Software TVS E-Pay

Banking - Passbook Printing, Ledger Printing, Cash Counting, DD Printing

Government - Ticketing, Documentation/Registration,

India Posts Receipt Printing

Shipping & Logistics - Track and Trace, Stocks/Inventories Management, Label Printing

TVS-E oversees the manufacturing and assembly of its products at its Tumakuru facility. Throughout this period of evaluation, the Company concentrates on enhancing its product management team, engineering capabilities, and solution offerings. In pursuit of earning a distinctive position in the industry, TVS-E aims to provide bundled packages comprising products and solutions to its clientele.

Over time, TVS-Es product range has evolved to meet the dynamic needs and demands of its customers. The Companys Parts and Logistics division offers an extensive selection of spare parts in the ICT and consumer electronics sector, catering to the B2B segment for both warranty and out-of-warranty requirements. The significant proliferation of consumer electronic products, driven by increased disposable income, growing purchasing capacity, and the availability of diverse electronic offerings from various manufacturers, presents a promising outlook for operations in this domain.

To enhance cost-effectiveness and align its operations with the Governments ‘Make in India initiative, TVS-E has implemented strategies to reduce imports from neighbouring countries. Some of these include sourcing materials from domestic manufacturers and implementing backward integration.

Furthermore, the Company has consistently expanded its portfolio over the years to meet the increasingly diverse

needs of its customers. In the recent assessment period, TVS-E successfully introduced new products such as 2D Barcode scanners, cash counting machines, Highspeed Receipt printers, ‘Make in India Touch POS machines, and revitalised existing products like the Passbook printer, Gaming Keyboard & Mouse, 1D scanner, and Dot matrix printers.

Looking ahead, TVS-E aims to transform into a ‘single-point- solution-provider, ensuring comprehensive and streamlined services for our customers. By leveraging state-of-the-art technology, we are committed to enhancing our offerings and staying at the forefront of industry advancements.

Our approach is deeply customer-centric, focusing on customising solutions to meet the specific needs and use cases of our clients.

We will continue to rely on our traditional distributor- led channels to effectively serve our products, while also diversifying our range through the incorporation of advanced Automatic Identification and Data Capture (AIDC) technologies. This includes offering specialised hardware solutions to meet diverse market demands. Additionally, we are adopting a Direct-to-Consumer (D2C) strategy, targeting key retail accounts across the country to enhance market reach and customer engagement. By working closely with our partners and embracing automation in identification and data capture, TVS Electronics is poised to innovate and expand its product offerings to meet the evolving needs of customers.

Drivers of PSG segment

- A continued focus on broadening the Companys product portfolio to address diverse customer requirements

- Effective brand positioning and extensive industry knowledge propelling segment expansion

m Increasing trend of digitalisation, leading to a huge demand for POS systems and billing software

- Growing demand driven by bundled solutions, complementing the Companys product offerings

- A strong sales network, varied distribution channels, and an internal sales force ensuring market penetration

- A firm commitment to the ‘Make in India initiative, resulting in the internalisation of previously imported products through backward integration

- Advent of e-commerce leading to increase in online shopping and need for automation and digitalisation in products

CUSTOMER SUPPORT SERVICES (CSS)

Within this vertical, TVS Electronics offers four product categories, which include:

Field Support Services (FSS)

Infrastructure Management Services (IMS)

Repair & Refurbishing Management Services (RMS)

Solar & Green Energy Services

E-auction & E-Waste

TVS-E stands at the forefront of the industry with its comprehensive Field Support Services (FSS). The Company caters to a broad spectrum of brand warranty services across various sectors including IT & Peripherals, Banking POS, Audio lifestyle & Consumer Electronics. Its services encompasses installation, break-fix solutions, and Infrastructure Management Services (IMS) tailored specifically to meet the needs of MSMEs and SMEs. TVS-E offers Infrastructure Management Services (IMS) 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, focuses on delivering surplus management solutions to B2B customers (sellers). The platform primarily aims to assist sellers in effectively clearing out their surplus inventory, scrap materials, and machinery, among others. This process is facilitated through a transparent online bidding system that engages a diverse range of bidders. Ultimately such a bidding framework ensures the discovery of the optimal price for the items being auctioned.

In addition, with the increasing focus on electric vehicles and solar energies, TVS Electronics is poised to capitalise on these opportunities. The Company has ample room for expansion and a strong market presence, coupled with established partnerships and enduring relationships with renowned brands. As such, it is well-positioned

for achieving significant growth in the days ahead. The Companys reputation for dependability in the product servicing sector further enhances its ability to collaborate with top brands. Therefore, it effectively bridges the gap between brands and the servicing of products with expired warranty.

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

In 2023-24, TVS Electronics made substantial progress, expanding its presence to 640 districts, marking a notable increase from 2022-23s coverage of 600 districts recorded in 2022-23. Moreover, the Companys services now cater to a larger customer base, serving 19,500+ postal codes across the country. Looking ahead, it aims to expand its coverage and accessibility further, with a target of reaching 670 districts in 2024-25.

Drivers of CSS segment

- TVS-Es expertise across a diverse range of products helps it to effectively manage customer support and disposal services associated with those products

- The Customer Support Services (CSS) segment has significant opportunities from the burgeoning EV market, particularly in in managing O&M for Solar Energy, charging infrastructure & battery swap service offerings for EVs.

- TVS Electronics is dedicated to becoming a holistic service provider for post-sales lifecycle management. This encompasses the seamless integration of brands, service partners, call centers, parts management, logistics, and related services, all efficiently tracked through our inhouse built service platform.

- Utilising advanced CRM technologies powered by AI and ML, the Company ensures a trusted and exceptional customer experience.

- Indias increasing emphasis on renewable power, particularly in the solar power sector, presents ample opportunities for the Company to expand its service offerings in this sector

ELECTRONIC MANUFACTURING SERVICES (EMS)

TVS Electronics provides comprehensive Electronics Manufacturing Services (EMS), including product design, development, end-to-end manufacturing, sourcing, Printed Circuit Board Assembly (PCBA), box build, testing, logistics, and aftersales service. The Company has inaugurated its EMS capability at its cutting-edge facility located on the outskirts of Bengaluru in Tumakuru, Karnataka. The introduction of a Surface Mount Technology (SMT) line underlines the Companys commitment to adopting the latest technological innovations.

Renowned for its customer-centric approach, the Tumakuru manufacturing unit provides complete solutions, covering supply chain management, PCB assembly, box build, and product testing. This integrated ecosystem enables TVS Electronics to address a wide range of customer requirements, both domestically and internationally.

GREEN ENERGY SERVICES

TVS Electronics Green Energy Business Unit (GEBU) is committed to facilitating the transition to greener and more energy-efficient practices. The core services include consultancy services, operation and maintenance solutions, and EV charging infrastructure and battery swap solutions. GEBU ensures the smooth functioning and guaranteed generation of solar energy systems, offering comprehensive solutions for the development of public EV charging and swapping stations. Additionally, GEBU provides consultancy services for the development of significant solar projects in Karnataka, including 42 MWp and 65 MWp installations, with an additional 80 MWp in the pipeline.

FINANCIAL OVERVIEW

During the fiscal year, the Company reported total revenues of Rs366 Crore, reflecting a 4% year-on-year growth compared to 2022-23. Revenue from the ‘Products and Solutions segment increased by 9% to 267 Crore, while revenue from the ‘Customer Support Services segment saw a slight decline of 8%, totaling 98 Crore. The EBIT margin decreased mainly due to higher depreciation costs from factory consolidation and increased manpower expenses. These costs were driven by new business initiatives, such as a dedicated focus on the retail segment, strengthening R&D, engineering and digital teams as well as diversification into new segments to offer value-added products and solutions through ‘Made in India initiatives. The Company also built teams to expand its reach through alternate channels under the Products and Solutions Group. Similarly, the Company strategically invested in enhancing its workforce to spearhead the development of Infrastructure Management services and pioneering green energy ventures under CSS segment. These strategic, onetime investments, incurred during the year are anticipated to significantly enhance the Companys future growth and profitability.

During the year, the Company invested Rs 28 Crore in capital expenditures for various expansion initiatives aimed at diversifying the business and enhancing operational efficiency. Of this amount, Rs 15 Crore was dedicated to the

Electronic Manufacturing Services (EMS) segment, as part of expansion plan. The remaining 13 Crore towards Tumkur factory consolidation. Of the total capex incurred 50% was funded through internal accruals. There were no changes in the Companys core business activities during the financial year ending March 31, 2024.

Key Ratios

Ratios	2023-24	2022-23
Current Ratio	1.37	1.41
Debt Equity Ratio (X)	0.41	0.09
Operating Profit Margin (%)	0.35	4.02
Net Profit Margin (%)	0.07	2.69
Return on Net Worth (%)	0.27	9.36
Debtors Turnover Ratio (X)	6.70	8.66
Inventory Turnover Ratio (X)	3.23	3.42
Interest Coverage Ratio	0.65	10.40

RISK MANAGEMENT

TVS-E acknowledges the importance of integrating risk management into its strategic planning framework to ensure long-term sustainability. As such, the Company takes a proactive approach to identify risks and develops action plans for effective mitigation. The Risk Management Committee, tasked with addressing and mitigating risks, reports directly to the Board of Directors, which holds the highest authority in the corporate governance structure.

By prioritising risk management, TVS-E adeptly navigates potential threats and protect its long-term viability. During 2023-24, the Company identified and mitigated several risks, including:

Risk	Raw Material Risk
Impact	TVS Electronics profitability may be affected due to an increase in raw material prices.
Mitigation	TVS-E has felt the impact of fluctuating crude and steel prices, directly affecting raw material costs. Despite these obstacles, the Company effectively improves cost efficiency by reducing dependence on imports, adopting backward integration strategies, and establishing in-house production capabilities for materials.

TVS-E DIGITAL

IT plays a pivotal role in TVS-Es daily operations and growth strategies, with sustained investments made in this area. The Company consistently reinforces its IT infrastructure, implementing various initiatives to enhance technological capabilities and drive innovation.

The Company has deployed Control Tower as a real-time monitoring system for field activities within the services business unit, integrating virtual agents to handle incoming customer queries. This initiative aims to provide 24*7 support, reduce abandoned calls, and enhance the Net Promoter Score (NPS) by ensuring timely and efficient resolution of customer inquiries

TVS-Es Customer Relationship Management (CRM) system has gained significant benefits through the Parts platform, in the form increased cost savings and earnings resulting from the platforms scalability

The Company rolled out a more mature retail billing solution in FY 2023-24, now available on the Play Store, specifically designed for Android devices.

TVS-E is on track to modernise Auction India to attract auction houses of all sizes, with a pilot using the new platform expected to go live in FY 2024-25.

Import Risk

The Companys heavy reliance on exports from neighbouring countries can affect the continuity in its operations in case of any trade disruption.

TVS-E implements a vigilant and continuous monitoring process.

The Company takes proactive steps to address this issue by prioritising the substitution of materials previously imported from neighboring countries, focusing on the ‘Make in India initiative.

This has been achieved through strategic measures such as backward integration and exploring alternative domestic suppliers.

Technology Risk

TVS-Es failure to keep pace with evolving technologies and emerging trends can have detrimental effects on the business.

Acknowledging the dynamic nature of the industry, TVS-E consistently prioritises investments in cutting- edge technologies. Through this commitment, the Company aims to deliver products that exceed curren market standards and maintain a leading position in innovation.

Cybersecurity Risk

Network failures and data breaches can significantly impact the Companys operations.

TVS-Es robust intrusion prevention system, combined with its comprehensive risk management framework, ensures that the Company is well-protected against cybersecurity threats. Additionally, the Company has appropriately covered this risk under insurance.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

TVS Electronics has embraced Corporate Social Responsibility (CSR) initiatives as a core component of its values for many years. The Companys initiatives centres around education and sports, thereby enabling communities to achieve success. VIPASSANA is an afterschool programme in Chennai, focused on children and led by marginalised women teachers from Upasana. This initiative promotes literacy and holistic development, empowering underprivileged children to become change- makers in their communities. Partnering with the Shraddha Maanu Foundation, TVS Electronics aims to foster educational growth and personal development among these children.

Olympic Gold Quest (OGQ) is a non-profit foundation dedicated to nurturing Indian athletes to achieve success at the Olympic level. In collaboration with OGQ, TVS Electronics strives to bridge the gap between Indian and global athletes, fostering national pride and helping athletes win gold medals. Through this partnership, TVS Electronics supports the development and success of Indian athletes on the world stage.

Under the Student Adoption Scheme at Siddha Ganga Mutt, the Company has adopted 201 students from Siddha Ganga Mutt in Tumakuru. Additionally, TVS-E has extended scholarships to four children, further contributing to educational endeavours. These initiatives exemplify TVS-Es commitment to promoting education and making a meaningful impact on the lives of young individuals .

The Company has also extended support to Sevabharathi in Tamil Nadu to aid flood-affected communities. This initiative reflects TVS Electronics dedication to supporting local communities during times of crisis and contributing to their long-term recovery.

HUMAN RESOURCE

Recognising the immense value of its workforce, TVS-E strongly emphasises fostering an environment of inclusive development. As part of its commitment to nurturing its diverse pool of employees, the Company cultivates a supportive atmosphere and offers competitive compensation packages aligned with industry standards. Such a remuneration structure facilitates accelerated career growth based on individual merit. Furthermore, it is complemented by exceptional personnel policies that prioritise the well-being and success of TVS-Es workforce.

TVS Electronics organisational culture is anchored in principles of integrity, collaboration, innovation, and customer-centricity, with leadership playing a pivotal role in shaping and upholding this culture. TVS-E actively promotes a collaborative work environment that encourages teamwork, knowledge sharing, and employee motivation. There is a continuous focus on empowering employees to enhance their skills, embrace new challenges, and foster a culture of innovation. This commitment to ongoing learning and development fosters both individual and organisational growth, promoting agility and adaptability within the Company.

To facilitate regular communication between management and employees, TVS-E has established effective mechanisms, including surveys to gather insights, town hall meetings to encourage open dialogue, and open- door policies that encourage employees to approach their superiors with any issues or suggestions. By fostering transparent channels of communication on a monthly, quarterly, and annual basis, the Company ensures that employee voices are acknowledged and valued, leading to enhanced collaboration and collective decision-making within the organisation.

Additionally, TVS-E places significant value on recognizing and rewarding employee contributions and accomplishments, fostering an environment of belonging, motivation, and loyalty among its workforce.

As of March 31, 2024, the Company had 703 employees on its payroll.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

TVS-E has implemented a strong internal financial control system that ensures proper financial reporting. Furthermore, all the material aspects of the Companys internal controls are robust. During 2023-24, TVS-E operated effectively in compliance with the internal control standards established by it for financial statements. These criteria consider the essential components of internal control as outlined in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting, issued by the Institute of Chartered Accountants of India.

CAUTIONARY STATEMENT

Certain statements in the management discussion and analysis may be forward-looking in nature within the meaning of applicable securities laws and regulations. Actual results may differ materially from those projected or implied. These statements refer to TVS Electronics Limiteds growth strategy, financial results, product potential, and development programmes based on certain assumptions and expectations of future events. The Company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements based on subsequent developments or information of events.