DEAR SHAREHOLDERS,
We are pleased to share your Company's progress in the recently
ended fiscal 2022-23. While the financial numbers succinctly summaries the story, the
satisfaction quotient was encouraging as we started reaping the benefits of our
decade-long efforts.
A THROWBACK ON FY23
To say the world is in uncharted waters would bean understatement. The
adverse impact of multi-dimensional challenges, such as armed conflict and climate change,
has exposed the fragility of the global economic system. It resulted in incalculable
damage (uncontrolled inflation, disrupted food supplies, increased human displacement, and
faltering job creation ecosystems) and tested the resilience of every nation.
The government-funded capital expenditure and the gradual increase in
interest rates allowed the nation to absorb the increased interest burden efficiently..
India adopted a significantly matured approach to this multi-dimensional global crisis
which helped India to emerge as one of the fastest-growing economy in the world. Also,
corporate India maintained its resilience to deliver superior performances.
OUR PERFORMANCE
Aligned with the India story, we reported a improved performance.
Revenue from operations stood at H1,350 crore, a growth of 11% over the previous year.
Notwithstanding heightened inflation and elevated interest costs, EBITDA improved to H167
crores in FY23 and a Net Profit of H95 crore in FY23. As liquidity improved, we adopted a
judicious capital allocation strategy between investing in our business segments to
capitalise on emerging opportunities and further reducing organisational leverage.
BUSINESS IN FY23
It was a year of palpable excitement as every business segment had a
healthy inflow of orders. There were good product introductions that gained the attention
of user sectors and hence promised to add new growth levers to our business segments.
Every business segment reported healthy operational and financial performance improvement
and ended the year with a decent open order book.
Electronics
Train Collision Avoidance System (TCAS) has become the flagship product
in our Electronics segment. We won four contracts for deployment of Kavach TCAS to cover
1,322 route km and 267 locomotives. Our team's proactive preparatory steps in FY22
helped us become the first Company to complete the execution of Kavach TCAS over Milestone
I of three projects in Eastern Railway, West Central Railway, and Western Railway. We have
made considerable investments to improve our delivery schedules. We have significantly
revamped and expanded our capacity for manufacturing electronic systems. We have adopted a
Lean Manufacturing strategy for most of our manufacturing operations, including
Electronics, to improve the productivity of our human resources and manufacturing
infrastructure. We continue to invest in inventories of electronic components to combat
shortages and long lead times. Together, these initiatives, among several others, form the
basis for the confidence in our supply chain resilience to complete the Kavach contracts
ahead of schedule.
We have deployed the Train Management System (TMS) in the Eastern
Dedicated Freight Corridor and our team is working hard to commission this solution in the
Sealdah Division of Eastern Railway. These eminent projects should help us garner
additional business for this solution shortly.
Defence
Having completed supplies of two sets of Type-IV batteries for use in
Kilo Class and Scorpene (Kalvari) Class Indian submarines, we have expanded our
capabilities and completed the type approval process for Type-II batteries for HDW German
(Shishumar) class submarines and secured manufacturing clearance. We expect to supply one
set of these batteries in the current year.
During the year, we received the production order for the supply of
thermal batteries to the Advanced Systems Lab (ASL) of DRDO for Agni Prime Strategic
Missile. In addition, we developed and supplied thermal batteries for two other strategic
missile programs of ASL.
Moreover, ELBI and IAI of Israel found that our batteries matched their
stringent performance and quality standards. This opens an exciting opportunity for the
Company over the coming years. We are increasing our engagement with these agencies to
develop new product variants to increase our business with them. As our products are
gaining traction globally, we are investing in critical and high-cost testing equipment to
ensure we meet international testing standards and minimise our dependence on external
test agencies. This will go a long way in improving our product quality and delivery
timelines.
Batteries
The battery division registered an excellent performance with robust
growth in lead-acid and Nickel Cadmium batteries.
After a lull of about 2-3 years, we secured large orders from the
telecom sector - from BSNL (a large order that is payment secured) and other private
players. Our 12V-VRLA battery sales also picked up appreciably as we commenced supplies to
small cell sites and increased our share of business with UPS OEMs.
We made considerable headway in the Data Center space with our PLT
batteries, positioning them as the most suited product for this application. We concluded
a contract with a large data center enterprise to supply PLT batteries over the next 30
months. In addition, we bagged large orders for PLT batteries from the Indian Army Data
Center under the NFS project.
The year's highlight was widening the canvass for our PLT
batteries. The Indian Army has recognised the performance superiority of PLT batteries and
approved them for deployment in battle tanks and heavy trucks. Further, the DRDL has
approved these batteries as a reliable power source for its Akash and other missile
launchers. Additionally, the demand for our PLT batteries for battle tank applications
continued to grow in the Middle East and South-East Asian countries.
We experienced strong demand from the Oil & Gas sector and railways
in the Nickel Cadmium space. We bagged our largest order for the prestigious IGGL pipeline
project under execution. We have also successfully converted lead acid battery demand to
Nickel Cadmium in various applications in the Power sector and Metro Rail, which should
help grow the numbers over the medium term.
Electric Drive Train
We made considerable progress in this area. We undertook road trials of
our electric drive train (EDT) solution on a 7.5T truck, demonstrating encouraging results
with our solution's performance and energy efficiency. It reinforces our belief that
our solution is viable for commercial . truck operators without financial subsidy from the
Government. We will continue to develop solutions for larger trucks.
OUR OPPORTUNITY WINDOWS
Electronics
In the Union Budget 2023-24, an allocation of H2.40 lakh crore has been
provided to the railway sector for accelerating the growth of the Indian Railways by
improving infrastructure and introducing high-speed trains, which would call for increased
TCAS deployment.
Considering these factors, Kavach TCAS garners the greatest attention
in the directional focus for FY24. We will aim to supply and install Kavach systems in 23
Vande Bharat Trainsets. So far, 20 Kavach systems have been delivered, and eight have been
installed in 4 Vande Bharat train sets. We will focus on getting our Train Management
System (TMS) certified to Safety Integrity Level II, according to CENELEC standards.
Following this certification, the deployment in Eastern Dedicated Freight Corridor will be
commercially operational. We will also complete the installation of TMS in the Sealdah
Division of Eastern Railway. This will prepare our teams to be ready to take on many new
projects for TMS, which are currently in the pipeline.
Defence
We have partnered with HAL Kanpur to develop batteries for civil
aircraft Hindustan D0-228 and with HAL, Bangalore for Light Compact Aircraft - Tejas, and
Advanced Light Helicopters, as part of the Atmanirbhar Bharat and Make in India
initiatives. Parallelly, we are working with the Ministry of Aviation and the Director
General of Civil Aviation (DGCA) to deploy NCSP batteries in all civil aircraft _ying in
India under the Atmanirbhar Bharat initiatives. When this happens, maybe a few years into
the future, it will open an interesting growth window for the HBL.
Further, leveraging our product success in the Indian context, we are
engaging with defence authorities in other nations with Russian-made aircraft and
helicopters to promote our batteries.
Having successfully developed batteries for Light Weight (LW) and Heavy
Weight (HW) torpedoes, we embarked on creating new variants to expand the market. Our
wider offering, backed by new variants and ratings and our LW and HW torpedo battery
solutions, is expected to enhance business volume in the next couple of years.
We are also working on products for new generation aircraft and
helicopters, recently acquired by the Indian Air Force and currently under development in
India.
Batteries
Telecom players are back, investing aggressively in creating telecom
infrastructure. Credible estimates suggest that telecom players will add another 4.5 Lakh
towers to improve latency and quality 5G coverage. Moreover, 5G consumes more power than
4G. Hence, the connected battery capacity will be higher for a given backup requirement.
Moreover, the replacement opportunity is also expected to be promising.
The UPS battery market is enormous (H3000+ crore) and is growing
consistently. While our share at this point is meager, we will adopt a cautious approach
in this space with calibrated investment around capacity and channel building. These
realities should sustain the demand for lead-acid batteries.
India is a data-guzzling market and the world's largest consumer
of data. This data needs to be stored in India. As a result, India will add a data center
capacity of over 4000 MW in the next five to six years. Our PLT batteries are fast
catching the attention of Data Centre consultants and entities, aided by their
performance, total cost of ownership, and safety over conventional VRLA and lithium
options. We hope to make deeper inroads into this large and rapidly growing business
space.
We have started FY24 on a positive note for our Nickel Cadmium
batteries with a sizeable order book. We believe the demand for Nickel Cadmium Pocket
Plate (NCPP) will remain robust over the next couple of years.
Our optimism is based on:
1) Mandatory commissioning of Fuel Gas De-sulfurisation (FGD)
plants across all thermal power plants.
2) Commissioning of Oil & Gas pipelines (around 15000 km)
across the country.
3) Implementation of various hydrocarbon projects under India
Hydrocarbon Mission 2030. The demand for these batteries will be further energised by the
Government's aggressive targets for rail electrification across the Indian Railways
network and various ongoing and upcoming (both new and expansion) metro rail projects.
HOW THE OVERALL BUSINESS WILL EVOLVE
The fruits of our transformation journey have only started to show. Our
high-value business segments, namely Electronics and Defence, where we enjoy an
oligopolistic position, have come under the spotlight as our products and solutions secure
approvals from user sectors. These segments should emerge as essential growth levers over
the coming years. Our high-value products will continue to drive profitable business
growth in the battery segment.
PROSPECTS FOR FY24
We started the current year with a healthy open order book for all our
business segments, which is heartening. We will deploy our energy and resources to grow
the business and widen our horizons.
We will also work on optimising costs and improving productivity that
will enable us deliver faster.
We look forward to inking this narrative once again next year with an
even better performance and further exciting prospects.
ACKNOWLEDGMENT
It is our privilege to pursue our passion for creating a better world
by integrating our capabilities. We will focus on long-term growth, the ultimate measure
to generate value. To achieves this, we will invest in strengthening our competitive
advantages, be disciplined in capital allocation, and stay diligent in our pursuit of
efficiencies.
We extend our gratitude to every team member for their relentless
efforts in uplifting the organisation.
We would also like to thank all our stakeholders, Board, Bankers, and
Government authorities for our support and assistance throughout our journey.
We solicit your continued cooperation.
| Warm regards |
| The Management Team |