Zodiac Energy Ltd Management Discussions

The discussion hereunder covers Companys performance and its business outlook for the future. This outlook is based on assessment of the current business environment and Government policies. The change in future economic and other developments are likely to cause variation in this outlook.

> ECONOMIC OUTLOOK:

Global economic overview:

The global economy is expected to sustain its resilience in 2024, with the IMF, estimated at 3.2 percent in 2023, is projected to continue at the same pace in 2024 and 2025. The pace of expansion is low by historical standards, owing to both near-term factors, such as still-high borrowing costs and withdrawal of fiscal support, and longer-term effects from the COVID-19 pandemic and Russias invasion of Ukraine; weak growth in productivity; and increasing geoeconomic fragmentation. Global headline inflation is expected to fall from an annual average of 6.8 percent in 2023 to 5.9 percent in 2024 and 4.5 percent in 2025, with advanced economies returning to their inflation targets sooner than emerging market and developing economies.

The global economic outlook in 2024 will be impacted by elevated interest rates as the war against inflation is not over and continues to be threatened by multiple factors including persistent core inflation, withdrawal of fiscal support amid high debt weighing on economic activity, low underlying productivity growth, a tight job market and economic uncertainties. Global headline inflation is expected to decrease to 5.9% in 2024 and to 4.5% in 2025.

Furthermore, the optimism for the future is cautious, it is tempered by the emergence of new and the continuation of existing geopolitical conflicts, notably the ongoing Russia-Ukraine situation and crises in the Middle East and the climatic conditions also pose a threat to the global economy. The drought in the Panama Canal will disrupt global trade to a larger extent. The imperative to address climate change is spurring investment in renewable energy and sustainable infrastructure, offering both economic and environmental benefits.

However, positive factors, such as stronger-than expected economic performance of the US and several large emerging market and developing economies, economic stimulus in China, the resilience of Europe amid the ongoing war, easing of supply chain bottlenecks and faster disinflation will bolster the outlook of the global economy.

(Source: EY report, IMF data)

- Indian Economic Overview:

Indias economic growth trajectory has been impressive, with a notable surge in the first quarter of FY23, enabling the country to surpass the UK and emerge as the worlds fifth-largest economy. The estimated nominal GDP for FY23-24 stands at $3.54 trillion, representing a 9.6% growth rate, driven by robust domestic demand, consumption, and investment, coupled with sustained government emphasis on capital expenditure.

Key highlights include:

- Strong export performance, with a total value of $109.11 billion in April-June 2025, led by engineering goods, petroleum products, and electronic goods

- Rising employment and private consumption, supported by increasing consumer sentiment, expected to drive GDP growth in the near term

- Government capital spending to be supported by tax buoyancy, a streamlined tax system, and digitization initiatives

- Medium-term growth prospects enhanced by increased capital spending on infrastructure and asset- building projects

- Contact-based services sector showing promise, with positive high-frequency indicators signaling a comeback

India has emerged as the fastest-growing major economy in the world and is expected to be one of the top three economic powers in the world over the next 10-15 years, backed by its robust democracy and strong partnerships.

Indias appeal as a destination for investments has grown stronger and more sustainable because of the current period of global unpredictability and volatility, and the record amounts of money raised by India-focused funds in 2022 are evidence of investor faith in the "Invest in India" narrative.

• Gujarat Economy

Gujarats economic performance has been outstanding, with a Gross State Domestic Product (GSDP) of $309.54 billion in 2023-24, representing a 13.36% growth rate over the previous year. The states per capita GSDP has also shown impressive growth, reaching $3,989 in 2022-23, with a Compound Annual Growth Rate (CAGR) of 8.75% from 2015-16 to 2022-23.

Key highlights include:

- Net State Domestic Product (NSDP) of $247.63 billion in 2022-23, with a CAGR of 10.21% from 2015- 16 to 2022-23

- Per capita NSDP of $3,480 in 2022-23, growing at a CAGR of 8.81% from 2015-16 to 2022-23.

- Gujarat has emerged as a prime destination for foreign investment, attracting $7,300 million in FDI inflows in FY24, according to the Department for Promotion of Industry and Internal Trade (DPIIT)

Gujarats economic growth trajectory is a testament to its robust industrial base, business-friendly environment, and proactive governance. The states focus on driving economic growth, coupled with its commitment to improving the quality of life for its citizens, makes it an attractive destination for investors, businesses, and talent.

- Union Budget FY 2024-25 provisions:

The Budget also emphasised the governments focus on energy security and employment generation in the clean energy sectors. Further, guidelines on various energy transition pathways will be released to decarbonize the energy sectors, skilling initiatives to improve availability of skilled workforce towards implementing energy transition.

The allocation for the solar energy sector was Rs 10,000 crore, an increase of 110 per cent from Rs. 4,757 crore which were allocated in the Union Budget of FY 2023-24). The increase in allocation is on account of a new scheme launched for the rooftop sector (PM Muft Bijli Yojana), besides higher allocation towards existing solar schemes and initiatives.

As per the budget there have been nearly 12.8 million registrations on the dedicated RTS portal with 1.4 million applications received since February 2024. In order to increase RTS penetration in India, the announcement of the PM Surya Ghar Muft Bijli Yojana (PM-SGMBY) with a combined outlay of Rs 75,000 crore till 2027 was made in the interim budget 2024.

Source: https: / /www.downtoearth.org.in/energy/budget-2024-25-will-measures-taken-for-the- renewable-energy-sector-help-achieve-2030-goals-2

Industry Overview:

> GLOBAL RENEWABLE ENERGY SECTOR OVERVIEW:

In 2023, global energy demand experienced a surge in growth, yet remarkably, the corresponding increase in CO2 emissions was subdued, rising by only 410 million tonnes (MT) compared to a 490 MT increase in 2022. This notable decoupling of energy demand and emissions growth can be attributed to the accelerated adoption of clean energy technologies, including solar photovoltaics (PV), wind power, nuclear energy, and electric vehicles.The expansion of these low-carbon energy sources has played a pivotal role in mitigating reliance on fossil fuels, thereby avoiding a more significant increase in emissions. Notably, the impact of clean energy technologies over the past five years has been profound, with global CO2 emissions rising by only one-third of the amount that would have been expected without these innovations.

This encouraging trend underscores the effectiveness of transitioning to a low-carbon economy and highlights the imperative for continued investment in and deployment of clean energy solutions to achieve a sustainable future.

Between 2019 and 2023, the clean energy sector experienced remarkable growth, with a two-fold increase in capacity additions compared to fossil fuels. This accelerated deployment of clean energy technologies has successfully curtailed the rise in fossil fuel demand, presenting a strategic opportunity to fast-track the transition to a low-carbon economy this decade.

In 2023, the global energy landscape witnessed a significant milestone, with the addition of nearly 510 GW of renewable capacity, representing a 50% year-over-year increase - the fastest growth rate in the past two decades. Solar photovoltaic (PV) technology accounted for approximately three-quarters of these additions, underscoring its emergence as a dominant force in the energy transition.

This momentum is poised to continue throughout the decade, aligning with the ambitious pledge made by several countries at COP28 to triple renewable energy capacity to 11,000 GW by 2030. As the world continues to transition towards a sustainable energy future, this trend is expected to drive:

- Enhanced energy security

- Reduced greenhouse gas emissions

- Increased energy access and affordability

- Economic growth and job creation

The stage is set for a transformative decade in the energy sector, with clean energy technologies leading the charge towards a net-zero future.

> INDIAN RENEWABLE ENERGY SECTOR OVERVIEW:

India has secured a commendable third position in EYs esteemed Renewable Energy Country Attractiveness Index, underscoring the nations remarkable progress in the clean energy sector. A synergistic combination of favorable market conditions, forward-thinking policy frameworks, strategic investments, and technological advancements aimed at establishing self-sufficient supply chains has catapulted Indias renewable energy landscape to unprecedented heights.

However, to sustain this impressive momentum, it is crucial to address and overcome potential bottlenecks. The seamless integration of burgeoning variable renewable energy sources into the grid will necessitate substantial investments in upgrading and expanding energy transmission infrastructure, ensuring a resilient and efficient energy ecosystem.

Key focus areas for Indias renewable energy sector include:

- Enhancing grid infrastructure to accommodate increasing shares of variable renewables

- Promoting research and development in energy storage and grid management technologies

- Fostering a conducive policy environment to attract investments and drive innovation

- Encouraging public-private partnerships to accelerate the transition to a low-carbon economy

By navigating these challenges and capitalizing on emerging opportunities, India can reinforce its position as a global leader in the renewable energy space, driving economic growth, energy security, and environmental sustainability.

Indias remarkable resilience in the face of global challenges has been a testament to its unwavering determination and growth potential. As the nation continues on its upward trajectory, its energy demand is poised to escalate at an unprecedented rate. In 2023, Indias power demand reached an all-time high of 243 GW, marking a decade-long annual growth rate of over 5%.

Looking ahead, India is slated to experience the most significant increase in energy demand globally till 2030, driven by its ambitious endeavors to electrify every household, even in the most remote villages. The accelerating pace of economic activity and digitalization will likely fuel power demand from all sectors - industrial, commercial, and residential - further amplifying the need for sustainable energy solutions.

Key highlights include

- Unprecedented peak power demand of 243 GW in 2023

- Decade-long annual growth rate of over 5%

- Projected largest increase in energy demand globally till 2030

- Increasing demand driven by electrification, economic growth, and digitalization

As India continues to navigate its growth journey, it is essential to prioritize energy security, sustainability, and efficiency to ensure a reliable and efficient energy ecosystem that supports its development aspirations.

India has achieved a remarkable expansion of its non-fossil fuel capacity, with a 396% increase over the last 8.5 years, reaching a total of 203.19 GW as of June 2024. This represents a significant 45.5% share of the countrys overall energy capacity.

Notably, India experienced an unprecedented 9.83% year-on-year growth in renewable energy additions in 2022, solidifying its position as a leader in the global energy transition.

The countrys solar energy capacity has witnessed an extraordinary 30-fold increase over the last 9 years, reaching 85.47 GW as of June 2024. With an estimated solar energy potential of 748 GWp, as per the National Institute of Solar Energy (NISE), India is poised for continued growth in this sector.

Since 2014, the installed renewable energy capacity, including large hydro, has risen by approximately 128%, demonstrating Indias commitment to sustainable energy development and its progress towards a low-carbon future.

As of March 31, 2024, Indias installed power generation capacity stands at 442 GW, with a significant 45% share attributed to non-fossil fuel sources, totaling 199 GW. The countrys commitment to renewable energy remains unwavering, as evident from the 71% share of renewable energy in power capacity additions during FY 2023-24.

In light of recent developments emphasizing energy security and affordable clean energy, achieving the 500 GW non-fossil fuel capacity target by 2030 has become increasingly crucial. To accomplish this ambitious goal, the government has set a strategic objective of tendering 50 GW of renewable energy bids annually until FY 2027-28, ensuring a steady trajectory towards a sustainable energy future.

This focused approach underscores Indias dedication to reducing its carbon footprint, enhancing energy self-sufficiency, and fostering a clean and green energy ecosystem.

The governments steadfast commitment to policy initiatives has continued to propel rapid renewable capacity growth. Key drivers include:

- Green Energy Open Access (GEOA) and General Network Access (GNA) adoption

- Revised Renewable Purchase Obligation (RPO) targets for designated customers

- Transparent competitive bidding processes

- Large renewable park development schemes

- Must-run status for renewables

- Inter-State Transmission System (ISTS) charge waivers

- Sector-specific financing through PFC, REC, and IREDA

These measures have significantly supported the transition to renewable energy, fostering a sustainable and green energy ecosystem.

Additionally, the amended Electricity (Late Payment Surcharge and Related Matters) Rules of 2022 have improved the cash flow situation for state DISCOMs and substantially reduced overdue receivables for renewable energy developers.

Furthermore, the government is exploring the implementation of differential Time of Day (ToD) tariffs to shift part of the night power demand load to daytime, promoting efficient energy utilization and peak demand management.

> Business Overview Zodiacs Business Overview

Zodiac Energy Ltd. is an Energy Solutions Provider with over three decades of experience across all key sectors of power generation. Our comprehensive range of services encompasses design, supply, installation, testing, commissioning (EPC), and operation and maintenance (O&M) of renewable energy generation projects. In essence, we offer end-to-end turnkey solutions, from conceptualization to the commissioning of renewable energy power plants.

We have installed solar power plants for many prominent clients which ranges from Invidiuval Resident Customers to Large Corporates to Goverment Organizations.

We have installed more than 80.82 MW* of Solar Power Plants (Residential Rooftop, Commercial Rooftop, Ground Mounted and Floating Solar). Our projects are located pan India.

Our Renewable Project Portfolio

Currently, we are catering into Residential & Commercial Rooftop Solar, Ground mounted solar, Floating Solar, Solar Tree, Operation & Maintenance etc. We have recently forayed into development of solar project for sell of electricity to distribution companies and corporate clients as Independent Power Producer (IPP).

Below is a summary of our Project Types.

1. Residential Rooftop Solar Projects

As solar EPC company in residential rooftop segment, we take pride in our impressive track record of over 33.94 MW* of installations throughout India. With a history of successfully connecting over 7,944 grid-connected solar systems*, we bring reliable and efficient solar solutions to homes across the country.

2. Commercial & Industrial Rooftop Solar Projects

Zodiac Energy Limited is in the Commercial and Industrial (C&I) rooftop solar sector, having successfully completed projects totalling over 35 MW* across India. With a portfolio comprising more than 170 installations*, we provide businesses with sustainable and cost-effective solar solutions, reducing energy costs and boosting business margins, while promoting environmental responsibility.

3. Ground Mounted Solar Projects

Zodiac Energy Limited is established player in the ground mounted solar sector, with a significant track record of over 11.86 MW in completed projects spanning various regions of India. Our expertise in ground mounted solar projects installations ensures the harnessing of solar energy on a larger scale, contributing to a greener and more susainable energy landscape.

4. Solar Tree

Zodiac Energy Limited has successfully commissioning 0.015 MW Solar Tree project, adding substantial value to the renewable energy landscape. This sustainable project exemplifies our unwavering dedication to pushing the frontiers of solar technology, demonstrating our commitment to innovation and environmental stewardship.

5. Floating Solar

Zodiac is embarking on the journey in this innovative field. We are currently focused on floating solar, aiming to harness the power of sunlight on water surfaces to generate renewable energy while contributing to the sustainable development of clean energy solutions. In the new era of Solar Energy Delivering a dual benefit: generating clean, sustainable energy and utilizing otherwise unused water bodies, optimizing land use while reducing environmental impact. The Company has recently commissioned a Floating Solar Plant of at GSFC Limited near Sikka, Gujarat.

6. IPP- Independent Power Producer

The Company has now forayed into IPP (Independent Power Producer) segment by securing PPA of 26.56 MW AC Capacity, from UGVCL, under Feeder Level Solarisation (FLS) Scheme under PM KUSUM Yojana - component C. Overall cost of project is approximately Rs. 152.03 Crore and for the same company is raising capital through QIP mode. All Projects are planned to be closed within 2024-25.

7. Operations and Maintenance (O&M)

While doing operations of power plant, our Company looks after day-to-day workings of power plants which includes cleaning of solar panels, checking the electrical connections on daily basis and keep the plant in running conditions throughout the year. Our cutting-edge solar panel cleaning systems are revolutionizing energy generation. By utilizing advanced technology, we ensure that solar panels are kept clean and free from debris, maximizing their efficiency and output. The maintenance of solar power plants are being carried out by regularly conducting preventive maintenance to avoid breakdown and in case of rare occasion of breakdown our company responds swiftly for breakdown maintenance.

SWOT analysis of the Company

Detailed SWOT analysis for Zodiac Energy limited is as follows-

STRENGTH	Established and consistent track record of more than Three Decades as a supplier of power and energy solutions with specialization in EPC of various kind of power plants; Experienced management team with cumulative experience of; Conceiving, developing and operating the large industrial projects. Executing more than 80.82 MW of solar PV based power plants. Well networked management in the Renewable Energy industry. Experienced team for design, engineering and execution of small- and large- scale solar power plants.
WEAKNESS	Our presence is mainly in Gujarat and nearby regions.
OPPORTUNITY	Huge market potential for solar power industry in India as solar power market in India is expected to add 500 GW by 2030. GoI has drawn definitive roadmap to achieve this target by implementation of suitable policies, subsidies for residential and institutional sectors, accelerated depreciation, RPO compliance, REC mechanism, compulsory targets for Government /PSUs and incentives and targets for DISCOMs to name a few. GoIs support for Residential and PM KUSUM schemes in the form of capital subsidy to the extent of 30% of the capital investment upfront based on the investment in the project reflecting Gols thrust on Solar Ene rgy. Huge potential for the exports of EPC services as almost all countries are going very aggressively on solar power installation and very few countries have requisite experience.
THREAT	Currently the market has become highly competitive due to entry of large number of unorganized players, which are creating short term disturbance by offering products at unrealistic prices. However, solar and renewable energy market is expected to witness consolidation over a medium term wherein only technically and financially strong players will survive.

> RISK AND CONCERNS:

The Company is exposed to business risks which may be internal as well as external. The Company has a comprehensive risk management system in place, which is tailored to the specific requirements of its

business considering various factors such as size and nature of inherent risks and the regulatory environment of the Company. The risk management system enables it to recognize and analyse risks early and to take the appropriate action. The senior management of the Company regularly reviews the risk management processes of the Company for effective risk management. The major risks identified by the businesses are systematically addressed through mitigation actions on a continual basis.

> INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY:

Internal Control system and adequacy Internal Control measures and systems are established to ensure the correctness of the transactions and safe guarding of the assets. Thus, internal control is an integral component of risk management. The Internal control checks and internal audit programmers adopted by our Company plays an important role in the risk management feedback loop, in which the information generated in the internal control process is reported back to the Board and Management. The internal control systems are modified continuously to meet the dynamic change. Further the Audit Committee of the Board of Directors reviews the internal audit reports and the adequacy and effectiveness of internal controls.

> FINANCIAL PERFORMANCE AND REVIEW OF OPERATIONS:

(Amount in Lakhs)

Particulars	F.Y. 2023-24	F.Y. 2022-23
Revenue from Operations	22,006.11	13,765.92
Other Income	96.62	83.70
Total Income	22,102.73	13,849.62
Less: Total Expenses before Depreciation, Finance Cost and Tax	20,109.88	13,015.91
Profit before Depreciation, Finance Cost and Tax	1992.85	833.71
Less: Depreciation	78.12	77.38
Less: Finance Cost	441.02	318.13
Profit Before Tax	1473.71	438.20
Less: Current Tax	381.00	125.00
Less: Deferred tax Liability	(1.26)	(5.73)
Less: Pervious year tax adjustment	(3.23)	-
Profit after Tax	1097.20	318.93
Other comprehensive income	5.02	(5.13)
Total Comprehensive Income	1102.21	313.80

• During the year under review, your Company has recorded total Revenue from Operations to the tune of Rs 22,006.11 Lakhs during the financial year 2023-24 as compared to Rs 13,765.92 Lakhs in the corresponding previous financial year which shows 59.86% increase in the turnover.

• Your Company has recorded total income of Rs 22,102.73 Lakhs during the Financial Year 2023-24 as compared to Rs 13,849.62 Lakhs in the corresponding previous financial year.

• During the year, your Company has generated earnings before interest, depreciation and tax (EBIDTA) of Rs 1992.85 Lakhs as compared to Rs 833.71 Lakhs in the previous year. The net profit after tax for the financial year 2023-24 stood at Rs 1097.20 Lakhs as compared to Rs 318.93 Lakhs during the previous financial year 2022-23 which states Increase of almost 244 % in the profit of the Company.

• Earnings per share stood at Rs 7.50 on face value of Rs 10/- each.

• Profit of your Company has increase due to increase in Turnover of the Company as well as addition in Other comprehensive income as compared to previous year. Hence, as the result of that profit of your Company has increased at robust growth.

> HUMAN RESOURCES:

Zodiacs human resource practices helped reinforce market leadership. The Company invested in formal and informal training as well as on-the-job learning. It emphasized engagements with employees by providing an enriched workplace, challenging job profile and regular dialogues with the management. The Company enjoyed one of the highest employee retention rates in the industry; it created leaders from within, strengthening prospects. As on March 31, 2024, the Companys employee base stood at 111.

DETAILS OF SIGNIFICANT CHANGES (I.E. CHANGE OF 25% OR MORE AS COMPARED TO THE IMMEDIATELY PREVIOUS FINANCIAL YEAR) IN KEY FINANCIAL RATIOS, ALONG WITH DETAILED EXPLANATIONS THEREFOR:

Ratios	2023-24	2022-23	Difference	Change in %	Remarks
Debt-Equity Ratio,	0.85	1.27	(0.42)	(33.16)	Due to decrease in debt and increase in shareholders equity
Debt Service Coverage Ratio	0.52	1.02	0.5	(48.79)	Due to increase in earnings available for debt service and installments paid
Return on Equity Ratio	26.24	9.25	16.99	183.70	Due to increase in the profit
Inventory turnover ratio	11.93	5.11	6.82	133.50	Due to higher efficiency on Working capital improvement
Trade payables turnover ratio	19.11	8.72	10.39	119.24	Due to increase in purchases
Net profit ratio	4.99	2.32	2.67	115.20	Due to increase in net profit of the company.
Return on Capital employed	35.23	16.66	18.57	111.41	Due to increased turnover
Current Ratio	1.71	1.64	0.07	4.48	-
Trade Receivable Turnover Ratio	3.87	3.84	0.03	1.01	-
Net Capital Turnover Ratio	5.27	4.47	0.8	17.81	-

OUTLOOK:

Your company, with over three decades of experience, offers a comprehensive solution for EPC services of various power plants, including design, engineering, procurement, construction, commissioning, and O&M services. Experienced management team with cumulative experience of Conceiving, developing and operating the large industrial projects. Executing more than 80.82 MW of solar PV based power plants. Well networked management in the Renewable Energy industry. Opportunity of Huge market potential for solar power industry in India as solar power market in India is expected to add 500 GW by 2030. Your organization values transparency, commitment, and coordination in all aspects of our operations, with a diverse team and a commitment to continuous learning and adaptation to new challenges. Your company continuously improves through staff training, equipment updates, and process checks. We prioritize transparency, commitment, and coordination with suppliers, customers, government authorities, banks, and financial institutions. Our experienced team ensures smooth functioning, ensuring smooth operations with a diverse team. Our commitment to environmental protection is centered on implementing eco-friendly energy solutions, minimizing reliance on finite resources, and achieving a carbon-neutral footprint.

CAUTIONARY NOTE:

Statements in this Report, describing the Companys objectives, projections, estimates and expectations may constitute forward looking statements within the meaning of applicable laws and regulations. Forward looking statements are based on certain assumptions and expectations of future events. These statements are subject to certain risks and uncertainties. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The actual results may be different from those expressed or implied since the Companys operations are affected by many external and internal factors, which are beyond the control of the management. Hence the Company assumes no responsibility in respect of forward-looking statements that may be amended or modified in future on the basis of subsequent developments, information.