Universal Cables Ltd Management Discussions

INDUSTRY STRUCTURE AND DEVELOPMENTS

Power Cables are used for bulk transfer of electrical energy from generating power plants to sub-station and thereon for distribution to end consumers. Extra High Voltage/High Voltage Cables (EHV/HV Cables) are used mainly in power stations, sub-transmission, large switch yards and major industrial, commercial and residential complexes. Medium Voltage Cables (MV Cables) are used for power distribution. MV and HV Cables are fundamental components of the power sector, acting as essential connector that seamlessly link different parts of the industry and facilitate the transition towards sustainable energy solutions. Low Voltage Cables (LV Cables) have a variety of end-user applications in addition to being used in power distribution. The overall market-size of power cables is increasing steadily in India owing to the boost provided by the policies and government led schemes and other regulatory initiatives in power sector. Further, increasing electricity demand due to rapid industrialisation, large scale grid modernisation, growing investment in renewable energy projects, rural electrification, railway electrification, substantial expansion of metro railway networks, renewed thrust on oil and gas sectors, smart city mission and exponential recovery in construction activities besides upgradation and expansion of existing electrical networks to meet growing renewable energy capacity addition. The governments initiatives and emphasis on preference to make in India and Atmanirbhar Bharat has put the focus back on minimising imports and promoting domestic manufacturing of power cables. Capacitors and Capacitor Banks are primarily used in Substations or Industrial complexes to improve the power factor, resulting in financial benefits for consumers. Additionally, they can be deployed to mitigate harmonics in the system, thereby enhancing power quality and prolonging the lifespan of equipment susceptible to harmonic distortion. Recently, capacitors have also assumed another significant role as per directives of the Central Electricity Authority for supplying bulk MVAR to wind and solar plants, connected to the national grid, where reactive generation is minimal.

The Company is looking forward to sustainable growth in periods to come largely driven by the supply as well as turnkey projects from Extra High Voltage (EHV) underground power cable facility which has successfully achieved substantial expansion in production capacity during the year under review, the ongoing and planned expansions at an accelerated pace for MV Cable, LV Cable, Insulated Winding Wires, Building Wires and Multicore Flexible Cables at Satna and Goa facilities in addition to capacity augmentation achieved through gradual expansion in production capacity during last few years. The other product lines comprising Specialty cables, Rubber and elastomer cables, Other types of Wires and Cables, Conductors & Capacitors fared well under current market dynamics and given production capacity. The Companys brand "UNISTAR", emblematic of quality and safety, continues to enjoy its reputation. The coexistence of the "UNISTAR" brand and the M.P. Birla Group Logo extends its manifestation to the longstanding corporate ideology and heritage.

Sectoral Review

Infrastructure and energy are two crucial enablers of economic progress and India is focusing strongly on them in successive union budgets because infrastructure and energy are not only closely linked but also to an extent, are dependent on each other. The outlay of 11.11 lakh crores for infrastructure in the interim budget 2024-25, the availability of long term interest free capital expenditure loans, etc. will hold the sector in good stead. India has been focusing on energy transition and energy security and the government has been working towards enhancing the countrys energy ecosystem with a plan for near doubling of the capacity in the entire electricity value chain by 2030 with public and private investments. The power demand in India has witnessed strong growth post Covid led recovery in the economy and improving industrial activity. However, the supply side has not ramped up materially due to under investments in the sector, leading to power shortages in pockets across the country. As a result, the power sector has entered into a capex cycle across generation, transmission and distribution space to ensure adequate supply of power to support the growing economy.

India is third largest cable market globally and the wires and cables industry constitutes 39% of the electrical industry and forms a crucial part in the construction and infrastructure activities of the government and private players. The Indian cables and wires industry alongwith FMEG products is estimated to be 1.80 lakh crores. The industry recorded a CAGR of 9-10% over Financial Year 2015-16 to 2022-23. According to an estimate, the industry should clock 10% CAGR over the next few years with higher growth estimated for wires and cables of around 12-14% CAGR until Financial Year 2027-28. The cables and wires industry can be split into five categories with Building Wires having the largest share which is anticipated to post a 16% CAGR over FY 2023-2027. The power cable and flexible & specialty cable category is projected to report a 14% CAGR and maintain its market share during the same period. Lastly, control and instrumentation and communication cable categories would register a CAGR of 11% and 15% respectively over FY 2023-2027. The demand outlook for wires and cables therefore looks to be robust due to heavy investment lined up in India in infrastructure, renewables, railways & metro railways, industrial capex and data centers in the next 7-10 years time-frame.

Power is amongst the most critical components of infrastructure, crucial for economic growth and welfare of the nation. Therefore, the existence and development of adequate power infrastructure is essential for sustained growth of the Indian economy. The demand for energy is rising across India and this expansion will need commensurate investments in energy transmission, distribution infrastructure in alignment with accelerated pace of energy transition. Indias power sector is one of the most diversified in the world. Sources of power generation range from conventional such as coal, lignite, natural gas, oil, hydro and nuclear power to viable non-conventional/renewables such as wind, solar and agriculture and domestic waste. To meet the rapidly increasing demand for electricity in the country, massive addition to the installed generating capacity is required and in further chain a robust and modern transmission, sub-transmission and distribution infrastructure needs to be created for evacuation and smooth distribution of electricity to the end users. In the power sector, while the over dependence on government support and subsidies has been recognised and steps are being taken, more is required to make the sector self-sustaining thereby providing an opportunity to develop an India-focused model with a greater emphasis on sustainable development.

However, the country faces a daunting challenge to reform and modernise the distribution sector, which still lacks sufficient competition in most parts of the country. Distribution holds the key to capacity build-up across the electricity value chain. The central government has had some success in nudging states to bring down indebtedness of their distribution monopolies but not on scale to inspire investing confidence by private capital. Historically, the emphasis has been more towards power generation capacity vis-?-vis transmission and distribution. The focus, however, needs to gradually shift towards transmission and distribution networks, including provision for smart metering, installing sub-stations for renewable energy to feed into the grid. As such going ahead, India will need higher investment in transmission and distribution grid infrastructure, grid automation, distributed grids, storage systems, etc. in respect of all of which technologies exist today but need sharper focus which will eventually lead to higher demand in growth for power cable industry. The transformation of National Grid India into Smart National Grid India shall require an upgrade and addition to the current power transmission and distribution infrastructure. India has articulated its clear commitment to reach net-zero emission by 2070 and meet 50% of its electricity requirements from renewable energy (RE) sources by 2030. The initiatives underway to ramp up RE capacity are promising and to bring them to fruition. The countrys efforts to ramp up grid infrastructure, storage capacity and formulate tailor-made energy policies for states will accelerate energy transition to a clean, affordable and accessible energy future. A transmission plan for integration of 500 GW of renewable energy capacity by 2030 is also being implemented in a phased manner commensurate with capacity addition.

Looking back at fiscal year 2023-24, one of the key highlights of Indias power sector was the growing power demand propelled by economic growth and improved industrial activities. As per National Electricity Plan, 2023, this trend is expected to continue in the coming period with peak power demand expected to reach 277 GW. This is despite the fact that India still has very low per capital energy usage of approx.1327 Kilowatt hours (year 2023) which is slated to increase gradually as electrification increases in states with high population and low energy access with better availability of power to increased number of households. Indias per capita energy consumption lags behind the global average of 3700+ Kilowatt hours and is likely to grow substantially in coming decade, with two third of incremental supply coming from renewable sources. The country is witnessing swift change in its energy consumption and energy sources simultaneously in a disruptive fashion. Indias energy needs are still growing and therefore legacy capacity using fossil fuels will not be retired even if the country transitions to a higher share of energy generation from renewable sources. In order to improve the energy distribution infrastructure of public utilities the government earmarked investment worth US$ 40 billion ( 3 trillion which includes budgetary support of 976 billion) to be invested over financial year(s) 2022-2026 under the Revamped Distribution Sector Scheme (RDSS) launched in July, 2021. The Scheme is looking to reduce the pan India AT&C losses to 12-15% and ACS-ARR (tariff) gap to zero by 2024-25. The said scheme subsumes four earlier running schemes in it. The scheme would also focus on installation of 250 million prepaid smart meters, feeder separation, modernisation of distribution system and rural and urban area system strengthening. As such there are exciting times ahead for the power sector as it endeavours to meet growing demand while also meeting its renewable energy goals. There is visible growth opportunities in Power Cables and Capacitors industry on the back of a combination of several macro factors and strategic initiatives undertaken by the Government. The Governments initiatives such as power for all, IPDS, RDSS, etc. should help demand growth for power cables. In addition, Indias capex cycle has witnessed meaningful upswing in recent years with both public and private capex showing positive momentum. In addition to domestic demand, the global market is also witnessing material growth with sectors like renewables and energy transmission and distribution infrastructure driving the pace. The fast rising in demand for electricity in India, particularly in non-metro cities including smart cities is driving the growth for Extra High Voltage Cables. Further, the rapid digital transformation, development of data centres and cloud computing may also propel the demand for power cables in the coming years.

Underground Cables (UG) are generally used in densely populated areas such as cities and metros, where there is a high density of automobiles, high-rise commercial & residential buildings and places with vital installations of uninterrupted power supply (such as water supply system, hospitals, IT services, etc.). UG cables help in ensuring uninterrupted power supply, which is uncommon in the overhead (OH) system. Though transmission and distribution losses have reduced over the years Indias power transmission and distribution loss of ~16% is still one of the highest in the world. This issue can be addressed via underground cabling. Hence, increasing urbanisation may see rising adoption of underground cables in metros and cities in the near future.

In all the states of the country, the underground sub-transmission power transmission network is inevitably being constructed, due to right-of-way constraints, ecological, environmental, safety and aesthetics issues, using High Voltage/ Extra High Voltage power cable system. In addition, the rising cost of real estate is economically favouring underground power transmission as opposed to overhead power transmission lines which occupies expensive corridor of land. Under the given scenario, the demand for EHV power cables has a large potential for growth in the coming years. The domestic cables and wires market has steadily moved to an organised play from a largely unorganised play, including regional/national players. The shift was led by rising awareness among consumers towards safety and quality, the advent of GST regime, technological innovation, brand building and technical and regulatory compliances.

All these suggest sustainable growth opportunities for products and services of your Company being an established supplier of power cables upto the voltage grade of 400 kV and also of Capacitors and Capacitors Banks for optimize energy saving and conservation.

Industry Specific Raw Material Erraticity

The cable industry finds itself grappling with the relentless fluctuations in the prices of metals and polymers, causing significant uncertainty and challenges in managing costs and operations. The prices of copper and aluminium remained volatile throughout the financial year 2023-24, with even greater volatility anticipated in the fiscal year 2024-25. It is expected that the prices of copper may reach new heights. However, the Polymers prices remained comparatively constant during the financial year 2023-24. Though many customers have conceded to the request of the industry in accepting Price Variation of input raw materials, there are still a considerable number of customers operating on firm price contracts. To mitigate this risk, the cable industry has made exhortation to these customers for incorporation of Price Variation in contracts as a standard procurement policy. The Cable industry is optimistic in increasing the bandwidth of customers adopting to Price Variation contracts. The cable industry is dependent on other critical raw materials, e.g., cross-linked polyethylene (XLPE) compound for Extra High Voltage Cables and a host of polymeric compounds, which are by-products of crude oil. The fluctuating crude oil demand have impacted the polymer producers causing a sudden global scarcity of these raw materials. The demand-supply imbalance has triggered an upward-spiral on the prices of these raw materials. Bulk of the raw materials, whether, indigenous or imported are linked to hard currencies, therefore, another major vulnerability is increased cost due to foreign exchange rate fluctuation.

Under the given depth and extent of the geo-political and economic uncertainty coupled with rising inflation worldwide, realignment of international commodity prices remains unclear.

Game Changing Policies to Spur Growth

The state of play of Nations in the international business is tending to lean on protectionism in trade policies. The Government of India has also taken several steps for the benefit of the Indian industries to foster a strong, sustainable and inclusive growth. Recognising the importance of improving and building new roads, railways, ports, telecommunications, energy infrastructure, etc., the Government of India has increased its budgetary allocations to underpin creation of infrastructure, while simultaneously undertaking measures to raise and attract private capital and administrative reforms to make the process for planning and executing infrastructure investments more efficient. Two key government initiatives aimed towards better planning and execution have been the National Infrastructure Pipeline (NIP) and Gati Shakti. NIP provides a comprehensive list of projects that would need to be implemented for India to upgrade its infrastructure in all areas i.e. transportation, energy, communications and social infrastructure. Goals of the NIP were to ensure seamless connectivity, prioritisation of resources and timely creation of capacities. The NIP was supplemented by a national infrastructure master plan which was announced under the title ‘Gati Shakti covering a period of 25 years with a focus on roads, railways, airports, ports, mass transport, waterways and logistics. Gati Shakti envisages building a digital platform that will bring 16 ministries together for integrated planning and coordinated implementation of infrastructure connectivity projects. The aim of the new National Logistics Policy is to reduce the cost of logistics from 14-18% of GDP to global best practices of 8% by 2030.

To augment "Make in India, make for the World", the Government has initiated another flagship Production Linked Incentive (PLI) Scheme which would upgrade and modernise technology, augment manufacturing capacities and would also attract foreign investments. The Government of India has selected 14 sectors uptil now as beneficiaries of PLI and more sectors are under consideration. Though the cable industry as of now does not fall under the scheme, it would stand to indirectly benefit from the industries entitled to the scheme by way of higher demand from new capital investments for scaling-up the capacities.

The geo-political developments have impacted the energy markets leading to both supply and price challenges, underscoring the need for energy security as never before. The Government of India has therefore undertaken a number of policy initiatives to promote renewable energy capacity, battery storage, green hydrogen eco-system, electric mobility, de-risking supply chain, increasing nuclear power generation and capacity and making regulatory changes to facilitate access to green energy by commercial and industrial users, etc. India is now the third largest producer of renewable energy in the world, with ~40% installed capacity coming from non-fossil sources. With close to 166 GW of renewable energy already installed, about 80% of Indias power capacity additions are expected to come from renewables as it works towards a 500GW non-fossil fuel based power generation capacity by 2030. Over three quarters of this growth is expected from solar and wind, and rest from nuclear, hydro and biomass. With the growth in renewable energy and an intent on indigenization, there is a huge opportunity for private players to create businesses across distinct value pools.

Reforms in Energy and other relevant Infrastructure Sector – Reflecting Opportunities

The power sector comprising of Generation, Transmission and Distribution is the key demand driver for electrical cables. Within these sectors, the power distribution companies (Discoms) have the largest demand for electrical cables. In the present scenario, the power distribution is the weakest link in the entire value chain of the power sector. The inept state-owned Discoms continued to impede the efficient functioning of the Generation and Transmission sectors. The Central Government has extended financial packages to bail-out the beleaguered Discoms from their massive accumulated losses and debt burden several times in last two decades including through the financial restructuring plan in 2013, Ujwal Discom Assurance Yojana I in 2017 and II in 2020. In addition to the liquidity infusion, policy changes and reforms are being implemented for sustained operational efficiency. It is expected that ongoing RDSS will be helpful in financing continued reforms focused on Discoms sustainability and may benefit consumers and industry alike.

• Revamped Distribution Sector Scheme (RDSS): The Ministry of Power launched the Revamped Distribution Sector Scheme (RDSS) in August, 2021 with a budgetary outlay of 3.03 trillion for five years and appointed REC and PFC, the state-run lenders as nodal lending agencies. It aims to bring down AT&C losses to 12-15% and align average cost of supply and average revenue realized by financial year 2025-26 with conditional finance linked to the achievement of milestones which, interalia, include advance payments of tariff subsidies, clearance of government department dues and liquidation of regulatory assets, etc. This scheme has now started yielding results as most of the state utilities have already floated the tenders and are at an advanced stage of awarding the contracts to the successful Bidder.

• Renewable Energy Push : At the COP26 conference, India pledged to increase its non-fossil fuel capacity to 500 GW, meet 50% of its energy requirements from renewable energy by 2030 and achieve net zero by 2070. Hence, creating transmission evacuation infrastructure for renewable energy generating plants is imperative. To this end, the Central Electricity Authority (CEA) has released a report, "Transmission System for Integration of over 500 GW Renewable Energy Capacity by 2030", which suggests the transmission system for harnessing renewable energy in major renewable energy potential zones as well as planned offshore wind farms in Tamil Nadu and Gujarat. The ministry of power has recently accepted a report of a task force, which paves the way for modern and smart electricity transmission system in India.

• Integrated Power Development Scheme ("IPDS"): IPDS envisages strengthening of sub-transmission and distribution network including metering at all levels in urban area.

• Accelerated bidding trajectory for Renewable Energy : In an another development, the Ministry of New and Renewables Energy has announced the bidding trajectory for renewable energy projects of 50GW annually between 2023-24 and 2027-28 which will sustain investor confidence in the segment by providing visibility on future capacity addition. It will also give a boost to the renewable energy manufacturing industry in the country by indicating the demand expected to be created for its equipment including cables.

• Liquidity Infusion Scheme(s) for DISCOMs : There has been a noticeable reduction in overdues of Discoms to generation and transmission companies and others due to certain policy initiatives, e.g. extra borrowings allowed to states equivalent to 0.50% of GSDP linked to power sector reforms, stricter rules for lending by PFC/REC, Letter of Credit for payment security under power purchase pact and the implementation of Electricity (LPS and Related Matters) Rules, 2022 with a provision to cut power supply to defaulting Discoms. The above policy measures have brought strict financial discipline in the functioning of Discoms to protect the entire value chain and as a result, Discoms are now better placed financially to pay off the dues to its creditors.

• Sectoral Reforms : The Indian energy sector landscape has transformed significantly over the past few years with reforms around encouraging clean-generation technologies, improving utility-level operational excellence programmes, enhancing consumer access, etc. It is on the threshold of next level of reforms through proposed amendments in the Electricity Act, 2003 for radical changes in the power distribution sector by enabling multiple distribution licencees through more powers to regulatory commission, renewable purchase obligations (RPO) to mandate power consumption from renewables with penalty for non-compliance, cost reflective tariffs to recover all costs with timely and adequate tariff revisions to make Discoms revenue sustainable. Poor financial health of state owned Discoms in distribution had impacted the sectoral value chain and their ability to innovate and limiting technology infusion. The planned reforms in the last leg will support sectoral investments and efficiencies around digitalisation, decarbonisation and decentralisation besides driving convergence across adjacent sectors which augurs well for power cable industry. While the propositions of amendments in the Electricity Act, 2003 have massive potential for improving the current state of energy distribution, critical consideration for laying down the appropriate operational framework would be imperative to ensure smooth implementation.

• National Infrastructure Pipeline (NIP) : The NIP envisaged in fiscal 2019 was originally a 111 lakh crore scheme, encompassing close to 5800 infrastructure projects. Subsequently, the target has been revised and currently stands at whopping

147 lakh crore. Under NIP, an average of 0.50% to 2.0% of the project expenditure is expected to be spent on wires and cables providing sustainable growth in business for the industry.

• Green Energy Corridor (GEC) : The Central Government is implementing the GEC at the transmission level and the Revamped Distribution Sector Scheme (RDSS) at the distribution level. The Governments target of 500 GW RE by 2030, which would require substantial increase in transmission and transformation capacity. Increased focus on grid efficiency to reduce AT&C losses would also play a key role in capacity additions in the sector.

In Search of Realistic Optimism

In the past, the Company has been buffeted by many cyclical economic downturns and disruptive risks, nevertheless, it has always shown its resilience by overcoming these volatilities. As regards to the ensuing financial year, the Company maintains a positive outlook considering the ongoing capacity expansions at accelerated pace for wires and cables at Companys Satna and Goa facilities, enlarged products serving portfolio of capacitors business, opening order bank, orders in the pipeline from domestic and overseas customers and anticipated exponential good growth in demand for Companys products given thrust of the Government on huge and sustainable infrastructure creation in the energy sector.

PRODUCT-WISE PERFORMANCE, OPPORTUNITIES, THREATS & BUSINESS OUTLOOK Power Cables & Capacitors

Revenue from operations during the year was 2020.67 Crores as compared to 2201.95 Crores during the previous year registering a decrease of 8.23%.

EHV Power Cables

The Extra High Voltage (EHV) Power Cable recorded a negative growth in revenue of 37% during the year under review as compared to the corresponding previous financial year primarily due to planned shutdown of its two VCV production Lines for capacity augmentation by way of modernisation and technology upgradation and change in product mix. Recognising the significant anticipated growth in the EHV Power Cable business, the modernisation cum technology upgradation and capacity expansion of EHV Power Cables at Companys existing facility at Satna (M.P.) was successfully implemented during the year under review and expanded capacity became fully operational in December, 2023.

The Companys VCV Lines for production of EHV power cables are now armed with contemporary technologies and fully geared to capitalise the anticipated exponential growth in the demand of EHV cables. This infrastructure provides a competitive advantage to the Company in terms of better quality & shorter delivery periods. The Company has over the years gained best in class credentials in EHV Cables business covering widest range of products upto 400 kV in domestic market and has recently completed successful execution of an order for 400kV HVAC EHV Cables for European market. The EHV Cable business therefore holds immense potential and is expected to drive growth of Companys business in near term in both domestic and global market places. The Company is also actively working to expand its footprints by entering into new geographies for EHV (HVAC) cables through its technical collaborator. The strategic expansion of business in global markets will not only de-risk the revenue stream but also reduce reliance on the domestic market, thereby making the Company more resilient to market fluctuations.

HV & MV Power Cables

The HV & MV power cables recorded a growth of 11% during the year under review as compared to the previous financial year by achieving most optimum capacity utilisation. The Company is equipped with two modern CCV lines with complete balancing equipments and machinery which provide a formidable manufacturing capacity and is vital to the Company for taking advantage of the opportunities as the demand stages a sharp growth in the new normal situation in consonance with the countrys infrastructural development programme. The Company has the advantage of a flexible manufacturing setup, enabling it to switch production between EHV and MV, the key products, at times when the demand is asymmetric in nature.

Considering the thrust given by the Government for improving the power distribution infrastructure and reduction of Aggregate Technical & Commercial Losses, the growth in demand for HV & MV power cables is inevitable as it is a critical need for almost every infrastructural development. In order to seize the emerging business opportunities, a brownfield project for enhancing the production capacity of MV Cables through debottlenecking is under implementation at Companys manufacturing facility in Satna which shall increase current annual production by approximately 25%. The enhanced capacity is expected to be fully operational in the last quarter of fiscal year 2024-25. Your Company has also undertaken an ambitious expansion plan for capacity augmentation in MV and HV/EHV power cables at its Satna facilities with a substantial capital outlay which is expected to pass through a rising growth curve in wires and cables business. The proposed expansion plan will enable flexible manufacturing setup, enabling the Company to switch production between HV/EHV and MV XLPE Insulated Power Cables, the key products, at times when the demand is asymmetric in nature.

LV Cables

The LV cables revenue was almost the same as the previous financial year. The Company considers it an imperative to expand its manufacturing capacity in this large market segment where economies of scale and low-cost production is the name of the game. The growth in real estate sector, metro railways, development of the smart cities would further catalyse the growth in demand. The Company is maintaining its dealer network in various parts of the country. The Company has modernised its plant with improved efficiency by blending the existing facilities with modern machinery and balancing equipments for scaling up the LV cable plant production capacity in phased manner.

The LV power cables has the widest application and therefore, constitutes the major quantum in the power cable segment. The Company is now undertaking a substantial expansion of its LV Cable production capacity at its Satna and Goa facilities and does not anticipate any marketing bottleneck having a strong brand equity. The Company also focuses on the genre of cables which involves special features on fire safety and environmental issues.

Rubber Cable for Original Equipment Manufacturers & Industries

Rubber specialty cables recorded a positive revenue growth of 12% during the year under review as compared to the previous financial year. The Company has an impressive product portfolio for the specialty cables and is catering to the original equipment manufacturers (OEMs) and the infrastructural segment such as wind energy, railways, steel plants, petro-chemicals plants, cement plants, onshore and offshore oil rig manufacturers, ship building, heavy engineering and mining industries. The Company with its advanced manufacturing technology using Pressurised Liquid Salt Bath Curing (PLCV), the only of its kind in India, commands a leading position over its competitors. The Company has in-house compounding facilities for formulating a wide spectrum of polymers which are tailor-made to customers specification. The size of the market continues to shrink for the conventional rubber cables manufactured by the Company as a substantial segment of this market has been cannibalized by Electron Beam Irradiated Cross-Linked Cables. Nevertheless, a facility for manufacturing of Electron Beam Irradiated Cross-Linked Cables has been setup by an associate company based on the synergic infrastructure advantages available in the associate company.

Light Duty Wires & Cables and Optical Fibre Cables

The Company has shown a growth of 16% during the year under review as compared to the previous financial year. The Company manufactures light duty wires & cables viz. winding wires, specialised building wires, flat cables, Multicore Flexible Cables and optical fibre cables at its plant in Verna, Goa. The demand for the PVC winding wires has somewhat plateaued, however, the Company has positioned itself as a dedicated supplier to major OEMs and have also added infrastructure for the manufacturing of Polywrap winding wire. This would enable the Company to increase its market share in the winding wires segment. The Company is also undertaking substantial capacity expansion of insulated winding wires, specialised building wires, multicore flexible cables at its Goa facility which is likely to be fully operational by middle of financial year 2025-26 and will give significant boost to revenue of Goa Unit.

Capacitors

The Capacitors business has shown an impressive growth of around 48% during the year under review as compared to corresponding previous year. The demand outlook for Capacitors is optimistic considering the need for quality power. The product portfolio comprises of LT & HT Capacitors upto 132 kV Class, which is divided into two segments (a) fixed type shunt capacitors and (b) Automatic Switched Capacitors for LV, MV & 33 kV voltage class systems. Also, newly launched products business like Active harmonic filters (AHF), Static VAr Generators (SVG) & Hybrid filters is gradually picking up and the Company is receiving good response from this market segment. The demand for reactive compensation in industries, transmission and distribution companies is expected to further rise in the coming period. There is a substantial need for supplying bulk capacitors in the national grid, especially where solar and windmills are connected. Additionally, there is a demand for TUNED & HIPASS HARMONIC FILTER Capacitor Banks at these grids to bring THD and TDD levels within IEEE 519 guidelines as mandated under guidelines framed by the Central Electricity Authority.

As per the draft Distribution Perspective Plan till 2029-30 prepared by the Central Electricity Authority in consultation with distribution utilities which accounts for pan-India distribution infrastructure planned by discoms to meet projected demand by 2029-30, the Companys capacitor business is likely to witness significant growth momentum. The country had a total capacitors capacity of 59255 MVAr and the ambitious Plan aims to add nearly 46000 MVAr of capacitors by 2030, projecting a remarkable 77.60% increase over the existing installed capacity. This nationwide effort will bring the total capacity to approximately 105209 MVAr which indicates huge growth potential for Capacitors business. Further, in the draft National Electricity Plan 2023 released by Central Electricity Authority (CEA), reactive compensation has been recognised as one of the focus areas for maintaining grid stability amidst the growing renewable energy integration which will add to the emerging business portfolio of the Companys capacitors business vertical. As per draft NEP, dynamic compensation devices such as Static VAR Compensators (SVCs) and STATCOMs are under implementation at the inter-state transmission system level to provide dynamic stability to the grid in contingency conditions and facilitate fast, robust system response to voltage fluctuations. The NEP estimates that an expenditure of 4.76 trillion will be required for additional transmission system including transmission lines, sub-stations and reactive compensation system during the period 2022-27.

The Companys primary focus lies on upcoming contracts for Supply, Installation, Testing, and Commissioning (SITC) work of MV/ EHV capacitors from state utilities and EPC companies operating in the wind and solar generation segments. To effectively compete in SITC projects, the Company has established an in-house manufacturing setup for MV automatic power factor control panels. Furthermore, the Company has successfully obtained new type test reports for MV panels, ensuring compliance with the qualification criteria of tenders.

In addition to this, the Company has laid efforts on supply and installation of 33 kV automatic power factor control systems required for renewable energy (Wind & Solar Farm), where demand is rapidly increasing. In pursuit of excellence and leadership in this business, the Company has recently commissioned 33 kV Auto Switched PF Correction banks at wind power stations in Gujarat, Rajasthan & Karnataka. Also, the Companys Harmonic Filter banks have been successfully commissioned for solar power stations in few states. These initiatives have bolstered the Companys prospects for increased business volume in the rapidly growing renewable energy sector. Further, in the recent past, CEA had issued guidelines to Renewable power plant developers to install 33 KV STATCOMs in place of Capacitor Banks to take care of LVRT & HVRT faults in the grid. To this end, the Company is under active discussions with commercial and product tie-up with one of the globally renowned STATCOM manufacturers which is pioneer in this field. At present no domestic manufacturing capacity exists to produce 33 kV STATCOM.

In response to the changing business environment, the Company has realigned its business strategy as a solution provider, offering concept-to-commissioning quality power system solutions. This expanded scope includes technical services, supply of associated equipment, and on-site commissioning and maintenance.

Exports

The Company has adopted multipronged strategy in export business by directly participating in the international bids to the overseas customers and also routing the export supplies through its long-standing an overseas technical collaborator. The Revenue from exports (excluding exports through merchant exporter) for the Company stood at 10191.40 lakhs during the year under review. The Company has been successful in penetrating into European & Latin America Markets in EHV cable segment besides the neighbouring countries such as Bangladesh, Sri Lanka etc. The Company sees continued growth momentum on export front considering pending/anticipated orders and the opportunities which remain untapped. Further, favourable government policies, development of eco-system for raw materials as well as China plus one strategy will aid in finding new geographies to increase export revenue. The Company has been accorded the status of "Two Star Export House" by Director General of Foreign Trade, Ministry of Commerce, Government of India for five years which is valid through 31^st March, 2028.

Overseas Competition

In the power cable segment, foreign manufacturers do not pose a competitive threat to the Indian manufacturers for HV, MV and LV cables. However, for the EHV cables, the Company has been competing with the EPC contractors backed by overseas cable manufacturers. The intensity of competition in the EPC business to some extent has been weaned-off with the Preference to Make in India public procurement order which provides margin of preference to the Indian manufacturers subject to meeting the local content norms. Hence, the competition would be more intrinsic giving opportunities to the manufacturers based in India.

FINANCIAL REVIEW

The financial performance of the Company during the year 2023-24 is stated as below:

• Your Companys total Revenue from Operations for the fiscal year declined by 8.23% at 202066.77 lakhs as compared to

220195.08 lakhs in the previous year.

• The aggregate other income during the year 2023-24 increased to 2360.27 lakhs as compared to 1762.62 lakhs in the previous year mainly due to increase in write back of unspent liabilities and Dividend Income.

• The Company Earnings before interest (finance costs), tax, depreciation and amortisation (EBITDA) during the current fiscal year 18529.49 lakhs was down 8.72% from the previous fiscal year 20299.25 lakhs and Profit before Tax (PBT) of 7007.07 lakhs was down 15.69% from previous fiscal year at 8310.74 lakhs mainly due to planned shutdown of its VCV lines in phased manner in order to accomplish the upgradation of Extra High Voltage Power Cables at Companys manufacturing facility at Satna (Madhya Pradesh) coupled with the shift in product mix from Copper to Aluminium.

• During the year under review, the Company Profit after Tax for the fiscal year declined 14.13% year-on-year to 5426.18 lakhs, compared with 6318.86 lakhs in the previous fiscal year.

• The finance cost has decreased to 9146.78 lakhs (previous year 9740.97 lakhs).

• During the year, the Company has maintained optimum working capital, constant credit period levels from suppliers and strategically maintained inventory levels to support the increased volume of operations.

• There was no change in the capital structure during the year. The Other Equity of the Company stood at 82896.06 lakhs during the year under review as compared to 67263.31 lakhs in the previous year.

• The Inventories in absolute term increased to 28401.52 lakhs as on March 31, 2024 from 28026.82 lakhs as at the end of the previous year.

• The Trade Receivable increased to 108486.40 lakhs as on March 31, 2024 from 89005.91 lakhs as at the end of the previous year.

• Key Financial Information (Standalone & Consolidated):

( in lakhs)

Description	Standalone		Consolidated
	2023-24	2022-23	2023-24	2022-23
Revenue from Operations	202066.76	220195.08	202066.76	220195.08
Profit before Finance Costs Depreciation/Amortisation and Tax	18529.49	20299.25	25935.31	27138.98
Net Profit after Tax	5426.18	6318.86	10822.46	11815.21
Fixed Assets	17814.17	13810.41	17814.17	13810.41
Investments	46601.69	33863.67	167424.46	138173.11

• For detailed information on the financial performance with respect to operational performance, a reference may please be made to the financial statements.

• Detail of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios:

Ratios	2023-24	2022-23	Variation	Reasons for Change
Return on Equity (in %)	6.91%	9.95%	(30.60%)	Decrease in Return on Equity ratio due to lower Profit After Tax during the year as compared to corresponding previous year.
Return on Investments (in %)	33.45%	63.69%	(47.48%)	Decrease in Return on Investments is attributable to the increase in Fair Value of Average Investments forming part of the denominator.

• Details of changes in Return on Net Worth is as below:

Ratio	2023-24	2022-23	Variation	Reasons for Change
Return on Net Worth (in %)	6.28%	8.93%	(29.67%)	Due to decrease in profitability.

RISK & CONCERNS:

The Company embodies risk control measures for enhancing and protecting the values of the Company. The Company acknowledges risks, not limited to operational, financial or compliance that could affect the future performance and market positioning of your Company. In view of the same the Company takes a qualitative risk assessment rather than a quantitative approach. The Company embraces a risk management portfolio for forecasting and mitigating the impact of internal and external risk factors. The internal risks which are mainly associated with the operations of the Company and the external risks which are linked with the economic and market volatilities are stated below:

INTERNAL RISKS: Strategic Risk

Considering the comprehensive picture of the challenges faced by the Company, risk mitigation policies have been put in place. The strategic risk alleviation is aimed at protecting the values of the Company. Strategic risk factors lurk in the Companys decision on various strategic objectives, e.g., organisational need to change roles and responsibilities, stronger governance, infusing of new skills, Capex portfolio, new competing requirements, degree of exposure in business risk-taking based on speculative gains, quantum of contingencies in different functions, timing decision on entering into new businesses, hiving off or vacating existing business activities, inclusive growth plan versus inorganic growth strategy. In pursuit of value against risk factors, the Company decides on balancing the growth, risk and return.

Policy Risk

The Company integrates the risk control measures into the organisations overall governance by periodically assessing the risks of the policies for internal operations and the statutory issues. Based on the risk assessment, the policies are amended from time to time.

Employee Turnover Risk

The Company retains a team of qualified and experienced personnel where the attrition rate is lower than the industry average. Poaching of personnel by other industries both domestic and overseas is a risk factor. The loss of key personnel to competitors is a risk where the Companys technical information would be acquired by the competitors. The Company is motivating and rewarding employees to retain talent. The Company also maintains a policy to acquire talent as a succession plan to support the Companys growth strategy.

Working Capital Risk

The Company caters to the infrastructural and industrial segments, which largely depends on the economic buoyancy. Therefore, any setback in the economy directly impinges on the demand emerging from the infrastructural and industrial segments. The risk of economic downturn could lead to fund scarcity and delayed realisation of receivables which in turn would affect the working capital requirements of the Company. The Company gives priority to the customers who have sound financial locus standi. The Company closely monitors the working capital requirements by constant follow up on receivables and maintaining lean and symmetric inventories.

Liquidated Damage Risk

The Customers have become more demanding in terms of price and delivery period. Owing to intense competition, short delivery contracts have to be accepted by the Company. In case of failure to meet the delivery period, the Company is at a risk of being imposed with liquidated damage. The Company is constantly mitigating its internal constraints to improve the efficiencies in an integrated manner in all the functional areas including execution of turnkey/works contracts to reduce the possibilities of such risk.

Operational Risk

Operational risks related to people, processes, systems and external factors have a potential risk on the Companys performance. To reduce such risk, the Company has a risk-review policy in all areas of operations.

Project Risk

The Company is executing large turnkey projects. To implement such projects, statutory obligations from various authorities relating to right-of-way permissions are necessary. As these statutory obligations are neither in the control of the user nor within the control of the Company, this is a potential risk which may cause deferment of the projects resulting to blockage of receivables and cost over-run. The Company constantly keeps the customer informed on such delays involving statutory requirements in order to avoid the imposition of liquidated damages. The Company meticulously monitors the projects with constant coordination between the execution team at the respective sites with review at regular intervals. Prior to targeting project contracts, the Company carefully weighs the feasibility of timely implementing the projects.

Technology Risk

Your Company is agile on the technology frontier by constantly reviewing new technology in terms of product and process to avoid obsolescence. The Company has a background of constantly upgrading the technology to maintain its position at par with international players and remain ahead of its peers in the home-turf.

Growth Stagnation Risk

The Company has a profitable growth plan and avoids the risk of "growth-trap". The Company believes in a "good growth plan" for sustainability rather than being over-zealous to get bigger and brasher for risky acquisition for attaining a higher market share on a low margin strategy. The strategy of your Company is to optimise its resources on high-end-high-margin products as opposed to high-volume-low-margin products. Hence, the top-line growth is compensated with a better bottom-line ensuring better returns on capital employed.

Product Development Risk

Your Company has embraced the principle of the constant need for product innovation as per evolving industry standards. The newly developed products are validated by type testing and long-term accelerated ageing test from a recognised independent testing laboratory, if required. As these tests have significant cost involvement, any failure in the product development results to financial and opportunity loss. The recognised Research & Development Lab and in-house testing laboratories of the Company have NABL Accreditation and is equipped with comprehensive testing facilities which can verify and assess the quality of the product during the process and final stage prior to conducting the certification tests at an independent laboratory.

Brand Attrition Risk

New brands of various players have entered into the market segments which are popularised through advertising media and may gradually eclipse the Companys brand. The hallmark of the Companys success in retaining the sheen of its brand is by way of maintaining a top-quality image. The Companys brand image is synonymous to the best-of-class in quality. The Company issues periodical advertisements in some of the prestigious technical journals, participates in seminars & industrial exhibitions, publish technical papers to retain the brand image and invites customers and consultants for exposition of its manufacturing facilities. These activities are aimed at brand building and promotional strategies.

EXTERNAL RISKS:

Artificial and non-explicit trade barriers in certain export markets

The Global power cables trade is being increasingly exposed to trade policies and tariffs aimed to support and protect local manufacturing. The European Union and United States are looking at addressing carbon leakages and in this process, EU27 have come up with concrete rules to handle carbon transfers through Carbon Border Adjustment Mechanism (CBAM) which includes electricity sector also which may impact export competitiveness. USA has notified Buy America Build America (BABA) policy to boost local manufacturing. Such non-explicit barriers may impact export market.

Further the increasing demand for renewable energy sources prompts investments and innovations in cables designed for harsh environmental conditions, further shaping the evolving landscape of the power cable industry in terms of transitioning to more sustainable alternatives. However, the limited availability of sustainable materials and standardisation challenges hinder the industrys efforts to adopt environment friendly practices.

Market Demand Risk

Historically, the demand of power cables has been cyclical in pattern. Your Company is dependent on the infrastructural sector, industries and original equipment manufacturers. The Government policies have a direct bearing on the demand from the various market segments. Your Company has a broad base clientele, wide product range and flexible manufacturing set-up, therefore, it can somewhat off-set the cyclical or depressed demand of affected segment with the other segments. From time-to-time, the Company makes changes in its product- mix to suit the order and demand pattern.

Customer Risk

Your Company is prone to risk of customers priority shift, increasing customer power and over-reliance on major customers. To mitigate these risks, your Company maintains constant touch with its clientele to understand and deliver products and services aligned to its changing priorities. Your Company maintains strong business relationship with large customers by providing technical guidance and information, support on urgent and crisis requirements to remain virtually indispensable to the client. Your Company has built a reputation as a preferred supplier with most of its customers by creating a quality trust in a bid to protect itself from competition and entry of new players.

Environmental, Social and Governance (ESG) factors gained global relevance as key indicators for long term value creations requiring organisations to demonstrate integration of sustainable development practices in their operations. The Company has initiated appropriate measures for ESG implementation with internal and external stakeholders engagement in line with established global practices.

Competition Risk

The nature of competitive risk is distinct for each product group. In the EHV segment, the competition is from both, the Indian and the overseas manufacturers. The risk involves entry barriers which are gradually being made more stringent by the customers to screen out several players. It is imperative for the Company to acquire performance record credentials from the user on supply and installation to qualify as an eligible bidder. It is also necessary to repeat test and revalidate test reports for specific type & design of the product. The Company has to keep at par with the development and innovation introduced by the multinational companies to avoid the risk of obsolescence. In the HV & MV segment, new entrants pose a risk on the price competitiveness. The LV segment is intensely competitive with the proliferation of regional producers of low-quality-low-margin products which has been pernicious to health of the organised sector. The Company is addressing to the quality conscious customers to retain its market share.

Raw Material Price Risk

The prices of international commodities e.g., copper, aluminium, lead and polymers, which are the key raw material components, are subject to considerable price volatility. Further, commodities such as Aluminium and copper have use cases for higher applications in energy transition products. As a result, green inflation risks remain high. Since the market prices of cables are generally on firm price basis, the seesawing prices of these commodities can severely impact the cost of the product where the consequential risk must be borne by the Company. The Company gives priority to customers who allow price variation on input raw materials. In case of firm price contracts with protracted deliveries, the Company is actively pursuing back-to-back hedging that involves identifying the exposure timely and hedging it with vendor(s) at fixed price or by taking a future position at London Metal Exchange (LME) promptly to avoid such risk. Occasional scarcity of polymers in the global market is a risk in terms of meeting customers delivery commitments. Over and above, these polymer prices are sensitive to the crude oil prices where the volatility in recent times has been unprecedented. The Company is ameliorating such risk by procuring the materials in tranches to even-out price fluctuations. However, the relentless inflation trend in commodities which has been and will be a pain-point in the near future as well. While price corrections have been undertaken, they leg raw materials inflation putting pressure in operating margins.

Exchange Rate Risk

The Company is exposed to the risk of foreign exchange rate fluctuations. To cover this risk, all foreign currency exposures are closely monitored and forward covers are taken, wherever it is deemed appropriate. The Company also undertakes back-to-back hedging of forex exposure against LME positions.

INTERNAL CONTROL SYSTEMS

The Company has an adequate system of internal control in place, which assures of:

• Authorisation, recording, analyzing and reporting of transactions.

• Recording and adequate safeguarding of assets.

• Upkeep of accounting records and trustworthiness of financial information.

Key elements are:

• Clear and well-defined organisation structure and limits of financial authority and well laid out standard operating procedures (SOPs) for each functional authority and department;

• Corporate policies for financial reporting, accounting, information security, investment appraisal and corporate governance;

• Annual Operating Business Plan (AOP) including identifying key strengths, weaknesses, opportunities & threats;

• External firm of Chartered Accountants to carry out internal audit of all functions including physical verification of inventories;

• Risk Management Committee and Audit Committee of the Board which monitors and reviews all risks and control issues and financial matters;

• Computerized and integrated financial and accounting functions, information feedback system of process parameters and back tracing from finished products to raw material stage;

• Company is using higher version software SAP HANA for improved data management, integration of functional departments, and exercising better control. The software has a feature of recording an audit trail of each and every transaction, creating an edit log of each change made in books of account alongwith date when such changes were made and ensuring that the audit trail cannot be disabled in compliance with Companies (Accounts) Rules, 2014, as amended;

• Routine evaluation of all financial operating and information technology system; and

• Laying down risk assessment and minimisation procedures and regular review of the same.

MATERIAL DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATIONS

The Company do realise the importance of creating high performance organisation with motivated work force rather than having a transactional relationship, by leveraging deeper bonds with the employees. The Companys policies are accordingly framed for organisational excellence by developing and inspiring the true potential of Companys human capital to fully channelize the people power and create inclusive workplace through effective leadership, meaningful values and a culture where employees experience high levels of trust, such that each employee is able to bring their best self to work. The Company is creating a workplace culture where leaders empower all individuals to reach their full potential and where every employee feels a sense of belonging regardless of their demography. During the year, various Human Resources processes have been initiated towards the growth of employee skills and knowledge.

Implementation of healthy practices of Human Resource Development activities for overall development of human assets and induction programme for professionally qualified and skilled manpower including internal and external training programmes, workshops & seminars are the constant feature of the Company. The Company fulfil its task of training and development of its employees to the maximum extent by sponsoring them to various programmes and courses, such as Quality Circles & SS initiatives. The Company is fully seized of the current pace of economic transformation due to adoption of newer technologies and taken initiatives to keep the workforce engaged with multiple programmes for ensuring adequate growth opportunities, training and development, flexibility and work life balance, technology for productivity and providing competitive benefits for retention of talent. The Company is dedicated to do the welfare of its employees, their families and surrounding localities of the factory premises by providing social, culture and educational upliftment. The Company is increasingly focusing on holistic employee wellness owing to major changes in the working environment. The Company believes that employees well-being will be a crucial component in employees performance and retention and has a far reading impact on the Companys growth journey in future with the motive to keep them engaged for the long term. The Company is maintaining Residential Colony for its employees at Satna with Staff Recreation & Health Center together with Reading Room, Staff Club, Indoor/Outdoor Game facilities, Temple, Children Park, Dispensary, etc.

The Company is committed to establish Risk-free and Zero accident work environment. The Company is regularly doing various social activities related to rural development, healthcare and educational infrastructure and support to the ones who need it most, environmental awareness, women empowerment and skill development, etc. under CSR.

The Company conducts business in environmentally conscious way by negating the damage with environmentally positive and socially responsive initiatives. The Companys robust ESG framework which is aligned with contemporary domestic and global protocols, guidelines and standards is fully integrated with M.P.Birla Groups long standing ethos, ensuring that all business decisions are aligned with sustainability principles across environmental, social and governance pillars. While the Company has always been mindful of conducting business in a sustainable manner, the implementation of ESG framework conforming to applicable global standards will further strengthen resilience, transform organisation culture and create long term value for all stakeholders. The Company continued to maintain healthy and cordial relationship with its employees throughout the year. A Committee, comprising of senior officials, regularly reviews the issues related to the employees with a view to ensure immediate redressal of grievances. The Company employed 864 permanent employees as on March 31, 2024.

No complaint was filed during the financial year under the Sexual Harassment of women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

CAUTIONARY STATEMENT

The Management Discussion and Analysis may contain certain statements that might be considered forward looking. These statements are subject to certain risks and uncertainties. Actual results may differ materially from those expressed in the Statement as important factors could influence the Companys operations such as Government policies, local, political and economic development, industrial relations, and risks inherent to the Companys growth and such other factors. Market data and product analysis contained herein has been taken from internal Company reports, Industry & Research publications, but their accuracy and completeness are not guaranteed and their reliability cannot be assured.