v guard industries ltd Management discussions

1. Economic Review & Outlook

The ebbing of the COVID-19 pandemic has allowed nations and their economies to recover and stabilise after the significant setbacks witnessed from 2020 to early 2022. This was, however, dampened by the onset of the Russia-Ukraine conflict that started in February 2022, which had a significant impact on Europe. The war in Ukraine caused a substantial energy shock as the European-Russian hydrocarbon relationship ended when Russia invaded Ukraine, resulting in disruption of gas supply to Europe. The supply gap is now being filled by liquified natural gas (LNG) from the United States and Europe is pursuing strategies to reduce its dependence on

Russian gas, including demand reduction, increased efficiencies, renewables, LNG and other pipelines. The Russia-Ukraine war coming immediately after Covid pandemic led to deceleration of economic growth in 2022 and is expected to further impede growth in 2023.

Furthermore, in December 2022, the resurgence of COVID-19 in China had adverse effects on the global economy, causing supply chain disruptions, delays and increased costs for businesses. Chinas recent reopening facilitated a recovery thereafter.

Global inflation rose in 2022. According to the International Monetary Fund (IMF), January 2023 report, these pressures have peaked and are expected to decline in the coming years. About 84% of the countries are expected to have lower headline (consumer price index) inflation in 2023 than in 2022. Specifically, the global inflation rate is expected to decrease from 8.8% in 2022 (annual average) to 6.6% in 2023 and 4.3% in 2024. Despite this, the rates remain higher than the pre-pandemic levels of 3.5% observed from 2017-19. Globally, reduction in inflation is expected due to weakened demand for commodities, leading to lower prices and monetary policy tightening impacting core inflation. Amidst the pandemic and war, inflation has posed challenges for policymakers and businesses globally.

In FY23, the Indian economy faced challenges due to the Russian-Ukraine conflict causing a sharp rise in commodity prices. Although there were concerns about potential supply chain disruptions, the impact was not as severe as anticipated. However, the increased prices and potential scarcity of essential commodities could have slowed down recovery from FY22. Despite these challenges, the overall economy stayed resilient.

According to the IMF report, January 2023, Indias GDP growth will remain in 6-7% range between FY23 and FY25, with resilient domestic demand despite external headwinds, making India one of the fastest growing major economies in the world.

In FY23, India had a good monsoon with higher reservoir levels than the previous year and 10-year average. Inflation remained below 6% and consumer prices rose slowly. The Government of India and Central Bank took steps to control rising prices, with the retail inflation rate peaking at 7.8% in April 2022. However, India had one of the lowest rates of inflation above the target range globally.

Exports increased by 16% YoY in April-December 2022 driven by strong performance in petroleum products, gems & jewellery, chemicals, and pharmaceuticals. To improve resilience of the external sector, export promotion measures are being implemented and the National Logistics

Policy aims to reduce the cost of internal logistics.

The latest Free Trade Agreements with UAE and

Australia creates opportunities for exports at concessional tariff. The Government aims to create an export-friendly ecosystem over time.

Revived economic activity contributed to increased imports, including petroleum, electronic goods, and machinery. Efforts are underway to reduce certain imports in the future and promote the use of the Indian Rupee for international trade settlements.

Despite high oil prices raising import bills and expanding merchandise trade deficits, concerns about the current account deficit and its financing have reduced. The foreign exchange reserve levels are comfortable and external debt is low.

2. Sector Overview

The Indian consumer durables market has garnered attention of global marketers with 100% FDI allowed in the electronics hardware-manufacturing. Although the market share in this industry is shifting from unorganised to organised sectors, approximately 30% of the total market remains unorganised, indicating a significant opportunity for Indian players to expand their market share. With growing consumer awareness about technological advances and their applications in various sectors, artificial intelligence and manufacturing automation are expected to be critical future trends in the Indian Consumer Durables market. Industry 4.0 is likely to encourage investments in research and development, technology infrastructure and manufacturing processes, which will ultimately enhance production efficiency in this industry Between April 2000-June 2022, electronic goods attracted FDI inflows of US$ 3.68 billion. (IBEF: Consumer Durables, November 2022)

In recent years, Indian consumers have shown a strong inclination towards premium consumer durables products, particularly in urban areas. This trend has resulted in a shift from traditional products to more technologically advanced products, such as smart TVs and home appliances. As a result, the Indian Consumer Durables market is becoming increasingly competitive, with both domestic and international players vying for a share of the market. To remain competitive in this dynamic market, companies are investing in advanced technologies, such as artificial intelligence and automation, to streamline their production processes and reduce costs.

The Government of India has introduced several schemes and initiatives to support the growth of the Consumer Durables, Electricals and White Goods sectors. The ‘Make in India initiative, launched in 2014, promotes domestic manufacturing and attracts foreign investments in various sectors, including these industries. As part of this initiative, the Government has taken several steps to create a supportive policy environment for businesses, including reducing bureaucratic hurdles and providing incentives for manufacturing in India.

Government has initiated various schemes to drive energy efficiency and promote domestic production like Ujala for energy-efficient lighting,

Atmanirbhar Bharat Abhiyaan to promote self-reliance and domestic manufacturing in various sectors and Production Linked Incentive (PLI) Scheme for White Goods to boost manufacturing in India. These initiatives provide opportunities to domestic companies for setting up manufacturing setup to create economies of scale.

The Bureau of Energy Efficiency (BEE) ensures energy efficiency guidelines for electronic appliances, including a star rating scheme for 28 different consumer products. Displaying star ratings was mandatory for 10 products and voluntary for 18. A new guideline implemented during the year, . makes ratings mandatory for more products. This is being done in phases, starting with ceiling fans in January 2023. This will positively impact energy consumption in Indian households.

According to a report by BEE, "Impact of Energy Efficiency Measures (in FY21)", energy efficiency schemes led to 42 million tons of oil equivalent energy savings in 2020-21, thermal energy savings were estimated at 22.24 million tons of oil equivalent, while electricity savings were 239.78 billion units. This led to monetary savings of 1,52,241 crore per annum and a reduction of 267.98 million tons of CO2 emissions annually.

The Indian Governments focus on promoting domestic manufacturing and innovation in the

Consumer Durables, Electricals and White Goods sectors has supported their growth. Continued support for these initiatives is necessary for a sustainable business and economic ecosystem. The market is anticipated to undergo a revolutionary transformation with the adoption of Industry

4.0 technologies, leading to improvements in production capacity, supply chain management, customer satisfaction and overall economic advancement.

Key ratios (%)	FY23	FY22
Gross Margin	30.1%	31.0%
EBITDA Margin	7.8%	9.7%
Net Margin	4.6%	6.5%
Ad Expenditure (incl. promotions)/Total Revenues	2.1%	1.6%
Employee Cost / Total Operating Income	7.3%	7.7%
Other Expenditure / Total Operating Income	15.0%	13.6%
Tax Rate	26.1%	22.3%
Diluted EPS ()	4.35	5.25

 

Balance Sheet Snapshot (Rs. Crore)	31 Mar 2023	31 Mar 2022		31 Mar 2021
Net worth	1,607.6	1,407.0		1,211.3
Gross debt	419.6	11.8		13.0
Cash and cash equivalents	66.9	61.3		281.2
Net cash position	(352.6)	49.5		268.2
Fixed assets	1,019.7	476.0		385.3
Balance Sheet Snapshot (Rs. Crore)	31 Mar 2023	31 Mar 2022	31 Mar 2021
Debtor (days)	50	50	52
Inventory (days)	97	130	124
Creditor (days)	62	69	94
Working capital turnover (days)	85	111	82
RoE (%)	11.8%	16.2%	16.7%
RoCE (%)	12.0%	20.5%	22.3%

 

S. No. Particulars	UOM	2022-23	2021-22
1 Debtors Turnover	Times	7.8	8.0
2 Inventory Turnover	Times	3.5	3.2
3 Interest Coverage Ratio	Ratio	16.8	38.3
4 Current Ratio	Ratio	1.8	2.4
5 Debt Equity Ratio	Ratio	0.3	0.0
6 Operating Margin i.e. EBITDA	%	7.8%	9.7%
7 Net Profit Margin	%	4.6%	6.5%
8 Return on Net Worth	%	11.8%	16.2%

Note: As the Company funded acquisition of Sunflame Enterprises Pvt Ltd. (Sunflame) through a combination of internal accruals and borrowings there were significant changes in the Interest Coverage Ratio, Debt Equity Ratio and Current Ratio. Due to high inflation in commodity prices and pricing gaps, net profit margin and return on net worth ratios were impacted.

4. Dividend

The Companys Board has recommended a final dividend of 1.30 per share. This translates to a payout for the financial year 2022-23 ~ 56.18 crore ( 51.10 crore in 2021-22). The dividend payout, for the year under review is ~ 27% in line with its consistent track record of dividend payout.

The Company believes in maintaining a fair balance between dividend distribution and cash retention that may be required for future growth, synergistic acquisitions, meeting unforeseen contingencies and maintaining a healthy balance sheet position.

5. Segment-wise Review

Products	FY23	Contribution	FY22	Contribution	YoY growth
	(Rs Cr)	(%)	(Rs Cr)	(%)	(%)
Electronics	994.0	24.1%	815.6	23.3%	21.9%
Electricals	1,798.8	43.6%	1,620.6	46.3%	11.0%
Consumer Durables	1,276.3	30.9%	1,064.0	30.4%	20.0%
Sunflame	56.9	1.4%	-	-	-
Grand Total	4,126.0	100.0%	3,500.2	100.0%	17.9%

Electronics

V-Guards Electronics segment encompasses voltage stabilizers, digital UPS systems and solar inverters, which experienced a growth of 21.9% and accounted for 24.1% of the total revenues. The demand for these products is highly influenced by the power situation in the country, in terms of both availability and quality of power supply to users. Notably, the demand for these products is closely linked to the sales of consumer electronics such as air conditioners, refrigerators and televisions. With stabilizers and inverters strongly correlating to the summer season, their sales are highly dependent on seasonal trends.

The segment witnessed an upward trend with increased demand for AC and stabilizers sales. Earlier in the year, the sales were affected by several factors, including a supply shortage of necessary electronics items, the presence of high-cost inventory and increased input costs, all of which had an impact on the business. Despite the challenges faced, the Company has been on a good trajectory of recovery.

V-Guard is a market leader in the Voltage Stabilizer category, whereas the competition mostly comprises regional players with limited reach. In FY23, the category experienced significant margin challenges due to high-cost inventory resulting from global electronics supply chain issues. Nevertheless, by the year end, the margins have started to recover. The Company offers a broad range of stabilizers that can support a diverse range of home appliances, including air conditioners, LED TVs, refrigerators, treadmills and washing machines. Among these products, stabilizers for air conditioners make the largest contribution, while the demand for stabilizers supporting LED TVs is on the rise. According to FICCI, Indias TV production is expected to reach US$ 10.22 billion by FY26 (IBEF: Consumer Durables, November 2022). As the use of white goods and televisions is still underpenetrated, this product category is expected to continue its growth trajectory in the coming years.

Inverters and batteries were also affected by higher input costs and shortage of electronic components. V-Guard currently holds a limited market share in inverters. However, the Company is actively seeking to increase its share in this segment. To support this goal, two plants are being established for manufacture of inverters and batteries. Investments made in these facilities are expected to yield results in the following years.

The Company has taken multiple measures in the

Digital UPS Invertor Batteries category to promote growth in the premium segment, leading to improved customer engagement, greater pricing leverage and higher profit margins. The Company views the premium segment as a critical driver of growth, particularly as it extends its market presence into regions with limited market penetration, frequent power outages and energy deficits. By concentrating on the premium segment in these areas, the Company intends to establish a stronger market position and generate new opportunities for expansion.

The expansion of rural markets, the electrification of new villages and demand for stable power supply, present an opportunity for the Company to grow this segment.

Electricals

The Electricals segment has an array of products, including house wiring cables, pumps, switchgears, and modular switches. This segment is the largest contributor to revenues. It contributed 43.6% to total revenues in FY23 as compared to 46.3% in FY22. The segment continues to witness growth on account of home improvement and new home construction activity. The segment achieved a growth of 11% over FY22.

V-Guards largest product category is House Wiring Cables which caters to retail segment of the market.

Growth in real estate and infrastructure drives the demand for wires. The market preference is towards high-quality, branded products that prioritise durability, safety, and reliability. Moreover, the evolving compliance and taxation structures have propelled the market towards organised sector manufacturers. The Companys manufacturing facilities situated in Coimbatore (Tamil Nadu) and Kashipur (Uttarakhand), along with a nationwide distribution network that includes electrical and hardware stores, enables efficient and prompt supply of products.

The segment also consists of Residential Pumps.

Demand for this category is dependent on the water table which is impacted by the vagaries of monsoon.

The Pump industry is characterised by the dominance of local and regional brands across the country. This dynamic creates a scenario where consumers have limited awareness and rely heavily on local retailers or plumbers when making purchasing decisions. In the year, demand was affected by an abundance of rainfall, resulting in a high water table with a decreased requirement for pumps. Nevertheless, demand saw a positive shift during the summer season, boosting its overall sales.

Modular Switches and Switchgears are key growth categories for the Company. These categories benefit from strong synergies with the electrical distribution network, as customers often require these products in conjunction with Wires and Fans. By leveraging resources across related product lines, V-Guard aims to drive growth in these categories.

To enhance product and manufacturing capability, the Company has made two strategic investments in the last few years. In 2017, the Company acquired 74% stake in Guts Electro-Mech Ltd and the remaining 26% of stake in September 01, 2022, making it a wholly-owned subsidiary. The subsidiary is engaged in the business of manufacturing and supply of Miniature Circuit Breaker (MCB) and Residual Current Circuit Breaker (RCCB) which are electrical protection devices adding further impetus to our growth ambitions in the category.

The Company also completed the amalgamation process of Simon Electric Private Limited (SEPL), the Indian business of Simon Group, Spain with V-Guard.

SEPL is engaged in the business of manufacturing and trading of electrical wiring accessories such as electrical switches, sockets and home automation products.

The Companys strategic initiatives in the switchgears and modular switches segment have opened up avenues for diversification and enhanced efficiencies in its product offerings. Moreover, the Companys strong manufacturing infrastructure in this segment provides support for its growth prospects.

Consumer Durables

V-Guards Consumer Durables segment comprises air coolers, fans, kitchen appliances, and water heaters, which contributed 30.9% to the Companys total revenue in FY23. The segment witnessed a growth of 20% during the year.

The Company is a renowned player in the water heater category, offering electric and solar water heaters. Its strategically located manufacturing facilities in Tamil Nadu, Himachal Pradesh and Sikkim, produce broad range of high-quality innovative products.

The category experienced a weak winter, resulting in the Company carrying high-cost inventory for a longer period. On the positive side, the business recovered from supply chain disruptions of the Covid years and was able to regain market share.

The Company is focussed on rooftop solar water heater category, catering to both individual and institutional buyers. In-house production capabilities bring about significant potential for long-term expansion, driven by technological advancements that are steadily reducing the payback period for buyers. Additionally, rising environmental consciousness amongst consumers will drive demand growth in this segment, making it a long-term opportunity.

V-Guard offers a diverse range of fans, including ceiling, table, pedestal and wall fans. The Company focuses on innovation, consistently launching new models with improved designs and aesthetics, with focus on premium offerings. Imagina range of premium ceiling fans boasts of app-controlled features, LED lights and attractive designs.

V-Guards fan range offers a winning combination of style, performance and convenience to consumers.

Fans is closely linked to the distribution of the Companys electrical products and is driven by consumer demand, particularly during warmer weather conditions. The Company has leveraged this trend by expanding its presence in Non-South markets, while also focussing on premiumisation and cost-efficiencies to further growth in the category.

The Company seamlessly transitioned to supply BEE-rated ceiling fans and began offering star-rated fans.

The Company is also setting up a manufacturing facility for TPW fans which will eliminate dependence on imports.

V-Guards product range in kitchen appliances includes induction cooktops, mixer-grinders, gas cooktops, and rice cookers, among others. The

Company has also recently introduced a range of products aimed at providing consumers with a stress-free kitchen experience. The Company is also setting up a manufacturing facility for mixer-grinders and gas stoves in order to achieve cost competitiveness and accelerated growth.

V-Guards range of air coolers includes desert coolers, window-fitted coolers, personal coolers, and room coolers. With a focus on expanding its presence in both South and Non-South markets, V-Guard sees this category as another growth opportunity. As demand for air coolers continues to rise in India, V-Guards range of products offers consumers efficient and affordable cooling solutions for homes and offices alike. The Companys commitment to innovation and expansion across different regions positions it well to capture the growing demand for air coolers in the country.

Sunflame

V-Guard completed acquisition of 100% stake in Sunflame Enterprises Private Limited (Sunflame) on January 12, 2023 for a total consideration of 680.33 crore. Sunflame brand has a rich legacy in the Kitchen and Small Domestic Appliances industry and its portfolio includes chimneys, cooktops, cookers and other small appliances. It is a strong player in the Non-South market which contributes to ~80% of its revenues. Primarily its operations are in general trade channel, with a modest presence in modern trade and e-commerce.

With this strategic acquisition, V-Guard positions itself to be among the top players in the kitchen appliances segment. Sunflames product portfolio, reputation and strong brand recall provides a robust platform to achieve meaningful scale in the kitchen business in an accelerated timeframe. This acquisition provides multiple levers of synergestic benefits across geography, portfolio, channel and customer dimensions.

Evolving E-Commerce

With focus on leveraging the increasing e-commerce opportunity across its business segments, V-Guard has successfully onboarded almost all its current relevant product categories on the digital platform. Company has also entered many new categories via the digital-first approach, which has helped to maintain significant growth rate over the last 5 years. The Companys E-com revenue has shown significant growth at >50% CAGR during FY 2021-23. Company has also strengthened the content and performance marketing capability by setting up strong teams, required tech solutions & processes, enabling partners and enhanced spends.

Given the massive opportunity that continues to unfold in the e-com space, V-Guard is working on all emerging and potential opportunities. With Sunflame acquisition, along with our planned backward integration and localisation, will help V-Guard to strengthen market share in e-com in Kitchen category.

6. Financial Performance

In FY23, the Company encountered several challenges, including an unprecedented inflation in commodity prices, pricing gaps, a constrained demand environment and supply chain disruptions. Despite these obstacles, the Company showed resilience, maintaining a stable performance throughout the year. The Companys ability to manage these challenges while just coming out of severe disruptions caused by Covid is a testimony to its resilience and strength.

Revenues increased 17.9% in FY23 to 4,126.04 crore.

This was spearheaded by Consumer Durables and

Electronics segments which grew by 20% and 21.9% respectively. We continue to make good progress in growing the business in Non-South markets. With a growth of 26.4% in FY23, Non-South markets now contribute 45.3% of the total revenues.

FY23 was a year of significant margin pressure caused by unusually elevated levels of commodity costs resulting in gross margin decline from 31% in FY22 to 30.1% in FY23.

With the passing of Covid-19, A&P and other expenses such as travel costs moved back towards their normative levels. EBITDA margins consequently contracted 190 basis points to 7.8% of revenues in FY23. Profit before tax declined 13% to 255.74 crore in FY23.

Profit after tax for FY22 included tax creditof 8.09 crore relating to earlier years as the Company moved to the new Income Tax regime. Profit after tax for FY23 declined 17.2% over FY22 to 189.05 crore.

The Company had taken a strategic call in FY22 to hold higher levels of inventory to overcome any supply chain disruptions which might arise due to the pandemic. With the risk of disruption diminishing and operations returning to normal, the number of days inventory also been reduced from 130 days as at March 31, 2022 to 97 days as at March 31, 2023 (on a trailing 12 months basis).

The Company generated robust cash flow from operations of 423.8 crore in FY23. Net debt as on March 31, 2023 is 352.6 crore on account of borrowings for funding the Sunflame acquisition.

The latter part of FY23 saw a decline in commodity costs which has started to reflect in the gross margins. The Company anticipates further margin recovery in FY24 as the higher-cost inventory gets consumed gradually, with gross margins reverting to pre-COVID levels.

Note: Financial performance detailed above is basis consolidated financial statements

7. Outlook

V-Guards strong brand equity, high-quality products and deep consumer relationships support its resilient business model, which includes a diversified product portfolio and a well-established distribution network.

Its management team possesses many decades of experience, comprehends the intricacies of the business and leverages on the countrys substantial growth potential. V-Guard has expanded from a single product Company based in Kerala, to a robust consumer brand franchise spanning across markets, with a diverse product portfolio that meet evolving customer needs and aspirations.

The Companys market visibility is continuously expanding as it has effectively grown its retailer base to over 60,000 touchpoints. In addition, its brand is gaining greater acceptance in Non-South markets, which is being driven by strategic marketing interventions as well as retail expansion. Looking ahead, the Company plans to add ~ 5,000 retailers across the country every year in the medium term, with a focus on expanding its presence in the Non-South region. Apart from initiatives for growth in the General Trade, V-Guards channel strategy includes expanding the footprint in the Modern Trade and e-commerce channels. As a result, the Company is well-positioned to deliver sustained growth in the years to come.

Over the past few years, V-Guard has steadily increased its reliance on in-house manufacturing. Presently, products manufactured in-house account for 60% of the Companys total revenues and will increase further in the next couple of years. Inhouse manufacturing is expected to enhance product competitiveness with differentiated offerings, enable accelerated time to market, bolster margins while eliminating or reducing dependence on imports.

Looking ahead, V-Guard is optimistic about its ability to deliver sustainable and profitable growth over the coming years. With a diversified product portfolio, a well-entrenched distribution network and a strong brand reputation, V-Guard is well-positioned to capitalise on emerging opportunities in Indias fast-growing consumer market. The Company recognises that creating shareholder value is a critical component of its overall success and remains dedicated to driving long-term value through strategic investments, operational excellence and responsible stewardship of its resources.

8. Strengths and Opportunities

Strengths

The Company has built a strong brand equity which is helping to expand reach and enter new product categories

• Consumer-centric organisation with emphasis on after-sales service, quality, innovation, R&D and new product development

• Strong pan-India footprint with investments in a well-entrenched distribution network spread across 60,000+ retail touchpoints

Comprehensive and diversified product portfolio across fast growing categories in the consumer electricals, electronics and durables space, catering to the mass consumption market in India

Strong execution track record and demonstrated ability to grow competitively and profitably

Experienced management team with strong understanding of the business complexities

Over the years, the Company has increased its in-house manufacturing and reduced its dependence on imports and outsourcing

Opportunities

Strong macro and demographic drivers: The industry will continue to see a strong uptrend in the medium- to long-term driven by macroeconomic and industry factors like increasing disposable incomes, increased ease of availability of finance, low product penetration levels, growing middle class, premiumisation in metros and urban towns, and increasing distribution reach by companies in tier II and tier III cities as well. In addition, the governments push for housing for all, increasing availability of electricity and infrastructure development augur well for long-term growth prospects of the sector.

Expansion into Non-South markets: Non-South markets account for ~ 45% of the Companys current revenues providing significant scope to expand and gain market share.

Shift from unorganised to organised: The Company is present in key product categories having significant market sizes. Increasing formalisation of the market presents an opportunity for organised players to benefit - especially market leaders, with established brands and entrenched manufacturing and distribution capabilities.

E-Commerce: The Company has a growing presence and a distinctive operating model in E-com.

Replacement demand: Shortening renovation cycles across segments due to rising disposable incomes, changing preferences of middle class and companies focus of technology and innovation are supporting strong replacement demand, contemporary product offering backed by strong product refresh capability offer potential to gain from this trend.

9. Enterprise Risk Management

The Companys Risk Management Framework incorporates leading risk management standards and practices. The Risk Management Framework outlines the series of activities that are used in identifying, assessing, managing and reporting risks.

Among other risks, following key risks were identified and discussed

Key Risks	Risk Statement	Mitigation Plan
Hyper- competition in marketplace	Cost of doing business is rising and growth is impacted due to traditional electrical players expanding focus to adjacent categories, slew of e-Com players leveraging vendor ecosystem, consolidation of companies and MNCs shifting focus on Indian FMCE market.	Product value chain to enhance product differentiation by having a focused organisation
		• Building long-term NPD pipeline
		• Building sell out management capability
Emerging channels	The channel landscape is fast changing with multiple trade formats and inadequate presence in certain emerging / established channels; hence the need arises to focus on Go-To Market, customer management & trade terms capabilities.	• focused organisation and agile operating model
		• Channel-centric organisational structure
		• Strengthening insights mechanism and digital marketing capabilities Transforming SCM, Service & Sell-out system
		• Strengthening Key Account Management and retail marketing capabilities
		Differentiated GTM Model (Sell-out) & exclusive products
Impact of digitisation	Advent of digitisation may bring about very significant changes to business e-commerce operations	Investing in capabilities required to scale-up
	model, including disruption in sales and distribution and shift in consumer plans behaviour and products.	• Smart products roadmap to drive digital product
		• Adopted digital Product Lifecycle Management
		• Processes around digital content and digital customer acquisition Building digitally-driven Sell-out system and next- generation supply chain capabilities
Margin erosion	Margin erosion due to commodity price volatility, delayed pricing actions, dependency on trading operations rather than manufacturing.	• Velocity of pass-through and timely pricing actions
		• Monitoring of commodity price movements and market price tracking mechanism
		• In-house manufacturing of established products through organic and inorganic routes
		• Value engineering initiatives for cost reductions
Information security	Due to increased threat of cyber security incidents globally, IT downtime and data loss can adversely impact business operations.	• The maturity level of cyber security is continuously benchmarked to industry standards
		• ISMS (Information Security Management Systems) and Policies were enhanced in line with ISO 27001
		• Focus is placed on building awareness among users
		• Cyber threats are mitigated by deploying various systems, tools, and processes
Environment, Social and Governance	Impact on business continuity and reputation due to Environmental & Social incidents and noncompliance of regulations.	• Developing ESG Strategy and Roadmap with the involvement of external consultants
		• Usage of renewable energy through green energy projects

 

Key Risks	Risk Statement	Mitigation Plan
		Water conservation projects
		Environment, Health, and Safety compliance framework in place
		• CSR activities directly by the Company and through NGOs
		• Building governance structure within the organisation to monitor the ESG initiatives
Supply Security	Sales are impacted due to supply disruptions due to external and internal factors.	• Own manufacturing facilities as alternatives for imported items Working on developing alternate makes and alternate supplier formulations
Inadequate Talent Pipeline	Unavailability of people with appropriate skills for the business of the future.	• Building entry level training programmes
		Customised product-specific training & specialised business learning module
		Digitising work processes and workflows across organisations
		• Collaborative platforms and technology to overcome the locational challenge

10. Human Resources

People-centric focus, supported by an open and empowering culture is enabling us to attract and retain best talent. The Company continues to undertake various initiatives for personal and professional development of employees. During the year, your

Company launched an Integrated Development

Progamme aimed at developing high potential talent. To build and develop a strong talent pool, Company has initiated talent acquisition of management and engineering trainees from Tier 1 colleges.

In line with best practice, the remuneration offered to critical talent has an ESOP component aligned with individual and business performance. The ESOP 2013 Scheme covers ~ 80 employees as on March 31, 2023.

As on March 31, 2023, the total number of employees of the Company is 2,647 against 2,477 on March 31, 2022.

11. Audit & Internal Control System

The Company has Internal Control Systems commensurate with the nature of its business, size and complexities which is integrated with Company policies, defined Standard Operating Procedures across processes and approved Delegation of Authority Matrix. The key objective of the internal control systems is to manage business risks, enhance shareholder value and safeguarding of the assets.

Cross-functional internal audits are conducted at all locations to ensure that high standards of Internal Controls are maintained. It provides reasonable assurance on the internal control environment and against non-occurrence of material misstatement or loss. Every quarter, Audit Committee reviews the adequacy and effectiveness of internal control system and monitors the implementation of audit recommendations.

The Company has a robust Internal Financial Controls monitoring framework. The Company continuously monitors process changes and updates the Risk and Control Matrices (RCMs) along with identification of process automation opportunities and enhanced management monitoring mechanisms to strengthen the control environment. Key controls across processes were evaluated during the year to provide assurance regarding compliance with the existing policies and significant operating procedures, and no significant weaknesses/deviations were noted in effectiveness of the controls. Further, the Statutory Auditors of the

Company also conducted audit of the Internal Financial Controls Over Financial Reporting of the Company as on March 31, 2023, and issued their report which forms part of the Independent Auditors report.