Foseco India Ltd

Economic Overview

In 2022, the global economy started on a positive note with GDP having grown by 6.1% in 2021 after the pandemic-induced contraction of -3.1% in 2020. However, the world quickly faced some significant headwinds.

In February, the energy markets took centre stage after Russia invaded Ukraine, resulting in a spike in prices of crude oil and natural gas.

Inflation in many countries hit levels not seen since the 1980s. The prices of food grains and essential items rose drastically in many countries due to the energy crisis and higher interest rates as Central Banks around the world tightened monetary policy.

Despite these challenges, the Indian economy remained resilient even in the face of a deteriorating global situation. India's nominal GDP at current prices is estimated to be Rs.232.15 trillion in December 2022 and has expanded by 15.4% over December 2021. Indeed, India is amongst the fastest-growing major economies in the world. Large public CAPEX investments into infrastructure and a moderating rate of inflation will help India grow at 6.5%.

Industry Overview

The foundry industry had been facing tough challenges for the past few years starting with the pandemic and then an increase in input costs. However, looking ahead, the prospects of the Indian foundry industry look positive with significant scope to grow. The automotive demand especially passenger car demand, has started increasing and commercial vehicle sales grew in 2022 over 2021, on the back of demand from the e-commerce sector and government spending on infrastructure. The government is expected to continue increasing its investment in improving the railways and building other essential infrastructures, creating an increased demand for construction, mining, and general engineering goods. This would provide tailwinds for the foundry industry and in turn for services companies like Foseco.

Performance Overview

In the past year, Foseco delivered strong financial and operational performance. Last year has seen your Company's topline grow while improving profitability and maintaining the total trade working capital. Our revenue has increased by 20.3% while profit after tax has risen by 40.7% compared to 2021.

As we head into 2023, we recognise the uncertainty in global economic developments, however, your Company's priority is to consolidate further by continuing to drive profitable growth and strengthen our market position.

We are committed to delivering value to our stakeholders and contributing to sustainable development.

To achieve this, we have taken several key strategic initiatives, including investments in capacity, innovation, and sustainability. In the past year, your Company has made significant progress in these areas by launching new products and technologies that improve casting quality, reduce emissions, and optimise resource usage.

Sustainability

In 2022, your Company held a sustainability drive with well-defined targets concerning CO2 and wastewater. Foseco has also taken steps to increase its use of renewable energy sources in the form of the installation of a solar power project in Pune with a capacity of 565 kW. Further, we have worked to reduce your Company's carbon footprint, implement energy-efficient processes and neutralise secondary energy with green energy contracts. These strategic initiatives not only benefit the environment but also provide Foseco with a competitive edge by enabling it to meet customer demand for sustainable solutions and comply with increasingly stringent regulations.

In conclusion, I would, once again, like to thank our stakeholders and employees for their continued support and confidence in Foseco.

We remain committed to navigating through the challenging business environment with a focus on sustainable growth and building long-term value for our stakeholders.

Sincerely,

Non-Executive Independent Director & Chairperson.