Vinyas Innovative Technologies Ltd Management Discussions

Global economy

Overview

Global economic growth declined from 3.5% in 2022 to an estimated 3.1% in 2023. A disproportionate share of global growth in 2023-24 is expected to come from Asia, despite the weaker-than-expected recovery in China, sustained weakness in USA, higher energy costs in Europe, weak global consumer sentiment on account of the Ukraine-Russia war, and the Red Sea crisis resulting in higher logistics costs. Growth in advanced economies is expected to slow from 2.6% in 2022 to 1.5% in 2023 and 1.4% in 2024 as policy tightening takes effect. Emerging market and developing economies are projected to report a modest growth decline from 4.1% in 2022 to 4.0% in 2023 and 2024.

Global inflation is expected to decline steadily from 8.7% in 2022 to 6.9% in 2023 and 5.8% in 2024, due to a tighter monetary policy aided by relatively lower international commodity prices. Core inflation decline is expected to be more gradual; inflation is not expected to to target until 2025 in most cases. The US Federal Reserve approved a much-anticipated interest rate hike that took the benchmark borrowing costs to their highest in more than 22 years.

Global equity markets ended 2023 on a high note, with major global equity benchmarks delivering double-digit returns. This outperformance was led by a decline in global dollar index, declining crude and higher expectations of rate cuts by the US Fed and other Central banks.

Regional growth (%)	2023	2022
World output	3.1	3.5
Advanced economies	1.69	2.5
Emerging and developing economies	4.1	3.8
(Source: UNCTAD, IMF)

Outlook

Asia is expected to continue to account for the bulk of global growth in 2024-25. Inflation is expected to ease gradually as cost pressures moderate; headline inflation inG 20 countries is expected to decline. The global economy has demonstrated resilience amid high inflation and monetary tightening, growth around previous levels for the next two years

(Source: World Bank).

Indian economy

Overview

The Indian economy was estimated to grow 7.8% in the 2023-24 fiscal against 7.2% in 2022-23 India retained its position as the fifth largest economy. The Indian rupee displayed relative resilience compared to the previous year. The nations foreign exchange reserves achieved a historic milestone, reaching USD 645.6 billion. The credit quality of Indian companies remained strong between October 2023 and March 2024 following deleveraged Balance Sheets, sustained domestic demand and government-led capital expenditure.

As per the national income released by the National

Statistical Office (NSO), the manufacturing sector output was estimated to grow 6.5% in 2023-24 compared to 1.3% in 2022-23. Growth in real GDP during 2023-24 was estimated at 7.3% compared to 7.2% in 2022-23.

Growth of the Indian economy

	FY 21	FY 22	FY 23	FY 24
Real GDP growth (%)	6 - .6%	8.7	7.2	7.8

Growth of the Indian economy quarter by quarter, 2023-24

	Q1FY24	Q2FY24	Q3FY24	Q4FY24
Real GDP growth (%)	8.2	8.1	8.4	8

(Source: Budget FY 24; Economy Projections, RBI projections, Deccan Herald)

India reached a pivotal phase in its S-curve, characterised by acceleration in urbanisation, industrialisation, household incomes and energy consumption. India emerged as the fifth largest economy a GDP of USD 3.6 trillion and nominal per capita income of H1,23,945 in 2023-24. India was ranked 63 among 190 economies in the ease of doing business, according to the latest World Bank annual ratings. Indias unemployment declined to a low of 3.2% in 2023 from 6.1% in 2018.

Outlook

India withstood global headwinds in 2023 and is likely to remain the worlds fastest-growing major economy on the back of growing demand, moderate inflation, stable interest rates and robust foreign exchange reserves. The Indian economy is anticipated to surpass USD 4 trillion in 2024-25 The Interim Union Budget 2024-25 retained its focus on capital expenditure spending, comprising investments in infrastructure, solar energy, tourism, medical ecosystem and technology.

Defence market overview

The global aerospace and defence market was valued at USD ~750 billion in 2022 and is expected to grow to USD 1,388 billion by 2030, with a compound annual growth rate (CAGR) of 8.2% from 2023 to 2030 with North America leading the market from 2023-30. This growth is driven by several factors, including increasing air travel demand, technological advancements, expanding space activities, rising military modernisation and growing investments in the aerospace and defence sectors The Indian aerospace and defence market is expected to be valued at USD 27.1 billion in 2024 and reach USD 54.4 billion by 2033, at a CAGR of 6.99% during 2024–2033. This growth trajectory is supported by various government initiatives such as Make in India, which incentivises domestic defence manufacturing and aims to reduce reliance on foreign imports.

In the Union Budget for 2024-25, the defence sector was allocated 6.22 lakh crore, reflecting strong governmental support for its expansion. These allocations, the highest among all ministries, provide stability and growth opportunities for indigenous defence companies. The sectors modernisation efforts encompass a wide array of military assets, including fighter jets, helicopters, warships, tanks, artillery guns, rockets, missiles, unmanned capabilities, and other combat systems.

Moreover, the strategic focus on defence exports aims to diversify clientele and boost revenue streams for domestic companies, positioning India as a reliable supplier in the global defence market.

(Source: ibef.org, pib,gov, zionmarketresearch.com, custommarketinsiight.com)

Indian medical devices market overview

Indias medical devices sector is a rapidly growing market, currently valued at USD 11 billion, making it the fourth largest in Asia and among the top 20 globally. This dynamic market is expanding at an unprecedented rate, driven by large multinationals and small and medium enterprises (SMEs). The export sector has also seen significant growth, with a compound annual growth rate (CAGR) of 9-11% over the past five years, and exports are expected to reach approximately USD 10 billion by 2025.

Recognised as a sunrise sector under the Make in India Campaign of 2014, Indias medical devices industry is poised for continued rapid growth and innovation. To support this growth, the Indian government has implemented several initiatives. Production linked incentive scheme, worth USD 400 million, has been launched to boost domestic production. Apart from this, policies such as the First National Medical Devices Policy, the National Policy on R&D and Innovation in the Pharma-MedTech sector, and the Scheme for Promotion of Research and Innovation in Pharma MedTech Sector (PRIP).

Growth drivers

Aerospace and Defence

Commercial aerospace: The commercial aerospace industry is experiencing significant growth, driven by an increase in aircraft deliveries, coupled with the replacement of aging aircraft, which has become a major growth driver.

Geopolitical tensions: The rising number of global and regional conflicts underscores the necessity for India to maintain up-to-date defence technology and equipment.

Indian defence sector: The Union Budget allocation for the Ministry of Defence (MoD) in 2023-24 is H5,93,537.64 crore, representing a 13% increase over the previous year. A record 75% of the defence capital procurement budget, approximately H1,20,000 crore, is earmarked for the domestic industry in 2023-24, up from 68% in the previous year. Defence expenditure: Over the next 5-6 years, anticipated investments across all three forces include the modernisation of fighter aircraft, unmanned aerial vehicles

(UAVs), radar programs, helicopters, combat vehicles, infantry combat vehicles (ICVs), missiles, tanks, submarines, and more. These initiatives are projected to create opportunities across the Indian and global defence companies, particularly in electronic warfare, avionics, radars, missiles, UAVs, and fighter craft. Rapid indigenisation adoption is expected, leading to significant domestic private sector catering to manufacturing and export opportunities supported by favourable policies.

(Source: Invest India)

Medical devices

Increasing healthcare expenditure: The Indian governments rising healthcare spending and focus on infrastructure development are driving demand for medical devices.

Growing demand for a_ordable healthcare: Indias large population, with many living below the poverty line, necessitates affordable medical devices and equipment.

Government initiatives: Campaigns like "Make in India" aim to boost domestic manufacturing, attract foreign investment, and create a favorable business environment.

Increased focus on healthcare infrastructure development: The governments push for modern healthcare infrastructure, including hospitals and diagnostic centers, is fueling demand for medical devices.

Rising prevalence of chronic diseases: The increasing incidence of chronic diseases like diabetes, cardiovascular conditions, and cancer is driving demand for devices such as insulin pumps and diagnostic equipment.

Growing demand for minimally invasive procedures: The popularity of minimally invasive procedures in India is boosting demand for related medical devices, such as surgical instruments.

Increasing outsourcing from multinational companies: Multinational companies are increasingly outsourcing manufacturing to India, attracted by cost advantages, a skilled workforce, and a favorable business favourable business environment.

Risk management

Macroeconomic risk

Geopolitical tensions in certain parts of the world could result in macroeconomic instability

Mitigation: The company diversified its customer portfolios by increasing exposure to local and non-risk markets

Technology risk

Lack of advancement in technologies, could lead to redundancy affecting production used in the product could become outdated.

Mitigation: The company engages in early discussions with customers on the possibility of products/solutions becoming obsolete and supporting the customer in the development of advanced product solutions. The company is consistently upgrading the production machineries as well as the skills of relevant employees to absorb the new technologies

Market risk

Existing and emerging competitors may increase market competition, leading to customer-driven price pressure.

Mitigation: The company focuses on growing business volume from repeat customers by offering multiple value propositions, maintaining timely delivery and quality, and providing design-led manufacturing solutions with a high focus on quality to stay ahead of the competition.

Operational risk

Compliance with stringent quality standards required by customers from different countries.

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Mitigation: The company continuously upgrades the quality standards of both personnel and machinery, along with testing and validation capabilities. Strengthen relationships with key supply chain partners and implement robust internal and external audit processes to drive continuous improvement and excellence.

Talent risk

The risk of losing talent across various functions.

Mitigation: The company implements effective measures for talent identification, development, recognition, and compensation corrections to retain key talent within the organisation.

Financial risk

Ensuring liquidity and access to capital for operational needs and growth initiatives, and managing risks related to foreign currency volatility.

Mitigation: The company maintains a robust internal system for timely receivables collection. Strengthen financial results and bank relationships to secure necessary funds for growth. Ensure contract terms with customer advances are in the same currency, explore the use of Vostro accounts with foreign customers, and engage in forward contracts aligned with the hedging policy.

Cybersecurity risk

Protecting IT systems and data from potential cybersecurity breaches. Mitigation: The company conducts regular audits with external experts to ensure continuous improvement in security processes. Implement advanced measures such as firewalls and antivirus software, and provide regular employee training to enhance cybersecurity awareness.

Financial analysis 2023-24

Balance Sheet

Borrowings for 2023-24 stood at H966.96 million compared to H857.1 million during 2022-23.

Total non-current assets for 2023-24 stood at H555.61 million compared to H403.44 million in 2022-23.

Net worth stood at H1,281.89 million as on 31 March, 2024 compared to H455.29 million as on 31 March, 2023, an increase of 181.55%.

Total assets increased by 42.93% to H3,087.18 million as on 31 March, 2024 from H2,159.86 million as on 31 March, 2023.

Inventories increased by 4.46% to H1,115.63 million as on 31 March, 2024 from H1,067.99 million as on 31 March, 2023.

Profit & loss statement

Revenues increased 35.26% from H2,345.24 million in 2022-23 to H3171.98 million in 2023-24.

EBITDA increased 59.5% from H205.7 million in 2022-23 to H328.1 million in 2023-24.

Profit after tax increased 109% from H73.43 million in 2022-23 to H153.47 million in 2023-24.

Depreciation and amortisation stood at H22.79 million in 2023-24 compared to H22.11 million in 2022-23.

Working capital management

Current assets as on 31 March, 2024 stood at H2,531.57 million compared to H1,756.42 million as on 31 March, 2023. Current ratio as on 31 March, 2024 stood at 1.52 compared to 1.17 as on 31 March, 2023. Inventories increased from H1,067.99 million as on 31 March, 2023 compared to H1,115.63 million as on 31 March, 2024. Current liabilities stood at H1,667.89 million as on 31 March, 2024 compared to H1,501.59 million as on 31 March, 2023. Cash and bank balances stood at H12.56 million as on 31 March, 2024 compared to H6.66 million as on 31 March, 2023.

Key ratios

Particulars	2023-24	2022-23
EBITDA/Turnover (%)	10.34	8.77
EBITDA/Net interest (%)	10.76	9.68
Debt-equity ratio	0.75	1.88
Return on capital employed (%)	0.18	0.19
Book value per share (H)	101.86	121.67
Earnings per share (H)	16.47	19.62