Indo Tech Transformers Ltd - Annual Report 2023-24 Analysis

Overview #

Detailed Analysis #

This analysis looks into the annual report of Indo Tech Transformers Limited (Indo Tech) for the fiscal year 2023-24, covering financial performance, business segments, risks, and ESG (Environmental, Social, and Governance) initiatives.

I. Financial Performance:

Indo Tech experienced significant growth in FY2023-24 compared to FY2022-23.

• Revenue: Increased by 35% to ₹50360.79 lakhs (₹37090.49 lakhs in FY2022-23). This surge indicates strong demand for their products.
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): Showed a remarkable 98% increase, reaching ₹6590.12 lakhs (₹3324.10 lakhs in FY2022-23). This highlights improved operational efficiency and potentially higher pricing power.
• Profit After Tax (PAT): Grew by 82% to ₹4686.02 lakhs (₹2570.18 lakhs in FY2022-23). This demonstrates substantial improvement in profitability.
• EPS (Earnings Per Share): Increased significantly from ₹24.20 to ₹44.12, reflecting the improved profitability.
• ROCE (Return on Capital Employed): Improved significantly from 16.4% to 27.3%, suggesting efficient use of capital.
• RONW (Return on Net Worth): Increased from 15% to 22%, indicating strong return generation relative to shareholders’ equity.
• Net Profit Margin: Improved from 7% to 9%, reflecting better cost control and pricing.
• Debt-to-Equity Ratio: Decreased considerably from 0.07:1 to 0.02:1, demonstrating a significant reduction in financial leverage. This is likely due to improved profitability and potentially debt repayment.

II. Business Segments:

Indo Tech operates solely in the manufacturing and sale of power and distribution transformers, special application transformers, mobile sub-station transformers, and sub-stations. The report does not provide a breakdown of revenue by specific product type, limiting a detailed segment analysis. However, the overall growth suggests strong performance across their product offerings.

III. Risks and Concerns:

The report identifies many key risks:

• Raw Material Price Volatility: Copper and CRGO (Cold Rolled Grain Oriented) steel are major inputs, and price fluctuations significantly impact margins. The reliance on imported CRGO increases vulnerability to forex fluctuations.
• Overcapacity in the Industry: Intense competition leads to aggressive pricing, potentially squeezing margins.
• Financial Health of State DISCOMs (Distribution Companies): The financial instability of DISCOMs poses a risk to timely payments for transformers supplied to them.
• Delays in Payments: Delayed payments from both state power utilities and private customers create liquidity challenges.
• Working Capital Intensity: High inventory levels and extended receivable periods contribute to higher working capital needs.
• Utility Orders Based on Low Price: The practice of awarding contracts to the lowest bidder (L1) creates pressure on margins and potentially compromises quality.

IV. ESG (Environmental, Social, and Governance) Initiatives:

Indo Tech demonstrates some commitment to ESG, although disclosure is limited.

Environmental (E):

• Energy Conservation: The company implemented many measures to optimize energy consumption, including improving power factor, implementing centralized air compressors, and reducing energy consumption per MVA. Quantifiable results are presented (25% increase in power efficiency, 30% reduction in energy consumption per MVA).
• Environmental Preservation: Initiatives focused on reducing water usage (17%) and CO2 emissions (24%) from diesel generators are highlighted.
• Paper Reduction: Digitalization efforts aimed at reducing paper consumption through digital data monitoring, online document exchange, and digital kiosks are mentioned.

Social (S):

• Workplace Safety: Measures like using laser distance finders to prevent falls and O2/RH analyzers in confined spaces are noted. The company received a 3-star rating from the World Safety Organization for Workplace OHSE Excellence.
• Employee Relations: While mentioning a temporary production suspension due to worker disputes, the report highlights the subsequent settlement. It also emphasizes employee training and development programs. However, detailed information on employee welfare, diversity, and inclusion is missing.

Governance (G):

• Corporate Governance: A detailed Corporate Governance Report is included, highlighting the composition and activities of the Board of Directors and its committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, and CSR). The report shows compliance with SEBI regulations.
• Vigil Mechanism/Whistleblower Policy: The company has a policy in place to report concerns related to violations of law or the Company’s Code of Conduct.
• Independent Directors: The role and activities of independent directors are described, including their meetings and familiarization programs.

Overall Assessment:

Indo Tech’s annual report showcases significant financial improvement in FY2023-24, driven by increased revenue and operational efficiency. The shift towards a lower debt-to-equity ratio strengthens the company’s financial health. However, the company faces considerable risks related to raw material price volatility, industry overcapacity, and the financial health of its customers. While some ESG initiatives are highlighted, more detailed and detailed disclosure is needed to fully assess the company’s performance in this area. The lack of segment-specific data hinders a deeper understanding of the business’s composition and performance drivers. Improved transparency regarding ESG matters and a more detailed segmental analysis would improve the overall quality and usefulness of the report.

Detailed Analysis #

Balance Sheet #

Asset Analysis #

Based on the provided Indo Tech Transformers Limited financial statements:

• Total Assets: ₹38,209.46 lakhs (as of March 31, 2024)
• Current Assets: ₹32,199.00 lakhs (as of March 31, 2024)
• Cash and Cash Equivalents: ₹2,502.92 lakhs (as of March 31, 2024). This includes cash credit accounts, deposit accounts (original maturity of 3 months or less), and cash in hand (which was 0).
• Accounts Receivable (Trade Receivables): ₹13,890.27 lakhs (net of loss allowance, as of March 31, 2024). The gross carrying amount was ₹14,587.89 lakhs.
• Inventory: ₹11,836.11 lakhs (net of provision, as of March 31, 2024). The gross inventory value was ₹12,208.71 lakhs.

Remember that all figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000).

Liability Analysis #

Based on the provided Indo Tech Transformers Limited financial statements:

• Total Liabilities: ₹16,493.54 lakhs (as of March 31, 2024)
• Current Liabilities: ₹12,725.42 lakhs (as of March 31, 2024)
• Long-Term Debt: ₹367.55 lakhs (as of March 31, 2024). This represents the portion of long-term borrowings not due within one year.
• Accounts Payable (Trade Payables): ₹8,478.14 lakhs (as of March 31, 2024)

Remember that all figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000).

Equity Analysis #

Based on the provided Indo Tech Transformers Limited financial statements:

• Shareholders’ Equity: ₹21,715.92 lakhs (as of March 31, 2024)
• Retained Earnings: ₹1,933.53 lakhs (as of March 31, 2024). Note that this is a component of the “Other Equity” section and represents the accumulated profits that haven’t been distributed as dividends. The total “Other Equity” is ₹20,653.92 lakhs, which includes securities premium, capital reserve, and general reserve in addition to retained earnings.
• Share Capital: ₹1062.00 lakhs (as of March 31, 2024)

Remember that all figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000).

Income Statement #

Operating Performance #

The Indo Tech Transformers Limited Statement of Profit and Loss doesn’t explicitly break down the figures in the way the question requests, requiring some calculation based on the provided information.

• Revenue: ₹50,991.82 lakhs (This is total income, including both revenue from operations and other income.)
• Revenue from Operations: ₹50,360.79 lakhs (This is the revenue directly attributable to sales of goods and services.)
• Cost of Revenue: This isn’t directly stated but can be approximated. The statement lists “Cost of materials consumed” at ₹39,272.43 lakhs and “Changes in inventories of finished goods and work-in-progress” at ₹(3,906.30) lakhs. Adding these together gives a rough estimate of cost of revenue of approximately ₹35,366.13 lakhs. Note that other expenses are included in the Operating Expenses section, not Cost of Revenue. Therefore, this is only an approximation, and the actual Cost of Revenue figure would be higher if it included all directly attributable costs, such as direct labor.
• Gross Profit: This requires calculating using the approximated Cost of Revenue. It would be approximately ₹50,360.79 lakhs (Revenue from Operations) - ₹35,366.13 lakhs (Approximated Cost of Revenue) = ₹14,994.66 lakhs. This is also an approximation.
• Operating Expenses: ₹45,263.80 lakhs. This includes cost of materials consumed, changes in inventory, employee benefits, depreciation and amortization, and other expenses.
• Operating Income: This needs to be calculated using Revenue from Operations and Operating Expenses. It would be approximately ₹50,360.79 lakhs (Revenue from Operations) - ₹45,263.80 lakhs (Operating Expenses) = ₹5,096.99 lakhs. This is also an approximation because the Cost of Revenue wasn’t explicitly stated.

Important Note: These figures for Cost of Revenue, Gross Profit, and Operating Income are approximations due to the way the financial statement presents the data. A precise calculation would require a more detailed breakdown of expenses directly attributable to the production of goods sold. The provided numbers are sufficient to give a general idea of the company’s profitability but not for precise financial modeling.

Bottom Line Metrics #

Based on the provided Indo Tech Transformers Limited financial statements:

• Net Income (Profit After Tax): ₹4,686.02 lakhs
• EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): ₹6,590.12 lakhs
• Basic EPS (Earnings Per Share): ₹44.12
• Diluted EPS (Earnings Per Share): ₹44.12 (The report indicates that basic and diluted EPS are the same)

All figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000).

Cash Flow #

Cash Flow Components #

Based on Indo Tech Transformers Limited’s Cash Flow Statement for the year ended March 31, 2024:

• Net Cash from Operating Activities: ₹3,176.72 lakhs
• Net Cash Used in Investing Activities: ₹(1,159.55) lakhs
• Net Cash Used in Financing Activities: ₹(809.00) lakhs

All figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000). Note that the parentheses indicate a net outflow of cash.

Cash Flow Metrics #

To calculate free cash flow (FCF), we need to make some assumptions and approximations based on the provided data because the annual report doesn’t explicitly state all the necessary components.

• Capital Expenditure (CAPEX): The cash flow statement shows a net cash outflow of ₹811.98 lakhs from “Purchase of property, plant and equipment (including Capital work in progress).” This is our best estimate for CAPEX. The report does not separate out capital expenditures for maintenance from capital expenditures for expansion.
• Dividends Paid: The annual report clearly states that no dividend was paid during the fiscal year. Therefore, dividends paid are ₹0.
• Free Cash Flow (FCF): FCF is typically calculated as Operating Cash Flow - Capital Expenditures. Using the values from the cash flow statement, an approximation of FCF would be: ₹3,176.72 lakhs (Net cash from operating activities) - ₹811.98 lakhs (CAPEX) = ₹2,364.74 lakhs.

Important Note: This FCF calculation is an approximation. A more precise calculation might require adjustments for changes in working capital that aren’t directly categorized as CAPEX in the report. Additionally, the report doesn’t explicitly separate maintenance CAPEX from expansion CAPEX, which would be beneficial for a better analysis.

Financial Ratios #

Profitability Ratios #

Calculating profitability ratios requires using the approximated figures from previous responses, which introduces some imprecision. Remember these are estimates based on the available data.

• Gross Profit Margin: (Approximated Gross Profit / Revenue from Operations) * 100

  • ≈ (₹14,994.66 lakhs / ₹50,360.79 lakhs) * 100 ≈ 29.77%

• Operating Margin: (Operating Income / Revenue from Operations) * 100

  • ≈ (₹5,096.99 lakhs / ₹50,360.79 lakhs) * 100 ≈ 10.12%

• Net Profit Margin: (Net Income / Total Revenue) * 100

  • ≈ (₹4,686.02 lakhs / ₹50,991.82 lakhs) * 100 ≈ 9.19%

• ROE (Return on Equity): (Net Income / Average Shareholders’ Equity) * 100

  • To calculate average shareholders’ equity, we need the previous year’s value which is not explicitly provided in a directly comparable way. The report mentions the prior year’s value in the statement of changes in equity. Therefore, this calculation cannot be reliably completed.

• ROA (Return on Assets): (Net Income / Average Total Assets) * 100

  • Similar to ROE, calculating average total assets requires the previous year’s value, which is not presented comparably within the report’s financial statements. This calculation cannot be reliably completed.

Important Note: The gross profit margin, operating margin, and net profit margin calculations are approximations because they rely on the estimated cost of revenue calculated earlier. The ROE and ROA calculations cannot be reliably performed due to a lack of directly comparable prior-year data for shareholders’ equity and total assets in the report’s statements. The report provides these figures in its discussion of key indicators, but not with the level of detail necessary for accurate calculation.

Liquidity Ratios #

To calculate liquidity ratios, we’ll use the values from the balance sheet:

• Current Ratio: (Current Assets / Current Liabilities)

  • = ₹32,199.00 lakhs / ₹12,725.42 lakhs = 2.53

• Quick Ratio: (Current Assets - Inventories) / Current Liabilities

  • = (₹32,199.00 lakhs - ₹11,836.11 lakhs) / ₹12,725.42 lakhs = 1.52

• Cash Ratio: (Cash and Cash Equivalents / Current Liabilities)

  • = ₹2,502.92 lakhs / ₹12,725.42 lakhs = 0.20

All figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000). The ratios suggest that Indo Tech has reasonable liquidity, although the low cash ratio indicates relatively low immediate cash availability compared to short-term obligations.

Efficiency Ratios #

Calculating efficiency ratios requires using the approximated figures and data from previous responses, which introduces imprecision. Remember these are estimates based on the available data. Also note that the annual report itself provides some of these ratios (though with slightly different denominators in some instances) in its discussion of key indicators but not with enough detail to allow completely accurate calculations.

• Asset Turnover: (Revenue from Operations / Average Total Assets)

  • To calculate average total assets, we would need the prior year’s total assets, which isn’t presented in a fully comparable format within the report. Therefore, this calculation cannot be reliably performed.

• Inventory Turnover: (Cost of Goods Sold / Average Inventory)

  • Using our earlier approximation of Cost of Goods Sold (COGS) at ₹35,366.13 lakhs and the year-end inventory of ₹11,836.11 lakhs, and assuming a similar inventory level in the previous year, the average inventory is approximately ₹11,836.11 lakhs.
  • Inventory Turnover ≈ ₹35,366.13 lakhs / ₹11,836.11 lakhs ≈ 2.99 times. This is a rough estimate, as the previous year’s inventory isn’t explicitly provided.

• Receivables Turnover: (Revenue from Operations / Average Accounts Receivable)

  • Using the year-end accounts receivable (net) of ₹13,890.27 lakhs, and assuming a similar level in the previous year, the average accounts receivable is approximately ₹13,890.27 lakhs.
  • Receivables Turnover ≈ ₹50,360.79 lakhs / ₹13,890.27 lakhs ≈ 3.62 times. This is a rough estimate, as the previous year’s receivables aren’t explicitly provided.

Important Note: The inventory turnover and receivables turnover calculations are approximations because they assume similar inventory and receivables levels in the prior year. The asset turnover calculation cannot be reliably performed due to missing prior year data for total assets. The report supplies some of these ratios (though using slightly different values for the denominators in some instances) within its discussion of key indicators; however, there isn’t enough detail to allow for accurate, independent calculation based solely on the financial statements themselves.

Leverage Ratios #

Let’s calculate the use ratios using the data from the financial statements and earlier calculations. Remember that the debt-to-equity ratio calculation is more precise than the others because it uses values that are directly reported in the financial statements. The other use ratios use approximated figures, which introduces imprecision.

• Debt-to-Equity Ratio: (Total Debt / Total Shareholders’ Equity)

  • Total Debt (Long-term + Short-term) = ₹367.55 lakhs + ₹132.00 lakhs = ₹499.55 lakhs
  • Debt-to-Equity Ratio = ₹499.55 lakhs / ₹21,715.92 lakhs = 0.023

• Debt-to-Assets Ratio: (Total Debt / Total Assets)

  • Debt-to-Assets Ratio = ₹499.55 lakhs / ₹38,209.46 lakhs = 0.013

• Interest Coverage Ratio: (Earnings Before Interest and Taxes (EBIT) / Interest Expense)

  • EBIT = EBITDA - Depreciation = ₹6,590.12 lakhs - ₹491.22 lakhs = ₹6,098.90 lakhs
  • Interest Expense = ₹370.88 lakhs
  • Interest Coverage Ratio = ₹6,098.90 lakhs / ₹370.88 lakhs = 16.44

All figures are in Indian Rupees (INR) in lakhs (1 lakh = 100,000). The low debt ratios indicate a conservative capital structure. The high interest coverage ratio suggests the company’s ability to comfortably meet its interest obligations. However, it’s important to note that the EBIT and therefore the interest coverage ratio are estimates based on approximations.

Market Analysis #

Market Metrics #

The provided annual report does not contain sufficient information to calculate the market capitalization, P/E ratio, P/B ratio, dividend yield, and dividend payout ratio. Here’s why:

• Market Cap (Market Capitalization): Requires the current market price per share and the total number of outstanding shares. The report provides the number of outstanding shares but not the current market price.

• P/E Ratio (Price-to-Earnings Ratio): Needs the market price per share and the earnings per share (EPS). We have the EPS, but the market price is missing.

• P/B Ratio (Price-to-Book Ratio): Requires the market price per share and the book value per share. We have the book value per share from the key indicators but not the market price.

• Dividend Yield: Calculated as (Annual Dividend per Share / Market Price per Share) * 100. The report states that no dividend was paid, making the dividend yield 0%.

• Dividend Payout Ratio: (Dividends Paid / Net Income) * 100. Since no dividends were paid, the dividend payout ratio is 0%.

To calculate the market cap, P/E, and P/B ratios, you would need to obtain the current market price of Indo Tech Transformers Limited’s shares from a financial data provider such as Google Finance, Yahoo Finance, or Bloomberg. Once you have that information, you can perform the calculations using the EPS and book value per share figures available in the report.

Business Analysis #

Segment Analysis #

The Indo Tech Transformers Limited annual report provides very limited segment information. It explicitly states that they operate in only one business segment: the manufacturing and sale of various types of transformers. Therefore, we cannot provide a breakdown by segment names, revenues, growth rates, operating margins, market shares, key products, and geographic presence beyond the consolidated numbers for the single business segment reported. The report does not offer segment-specific details, only consolidated financial data. Therefore, the answers to all of the sub-questions under this main question are the same, namely: The information requested isn’t available in the annual report.

Risk Management #

Risk Assessment #

Based on the Indo Tech Transformers Limited annual report, here’s a structured look at the key risk factors. Note that the report does not provide a quantitative assessment of impact severity or likelihood. These qualitative assessments are my interpretations based on the report’s descriptions.

I. Financial Risks:

II. Operational Risks:

III. Other Risks:

Important Note: The impact severity and likelihood are qualitative assessments based on the description of risks in the report. The report itself does not offer a quantitative assessment of these risk parameters. The mitigation strategies are also inferred from the text. The trends section highlights how the risks are expected to change or persist.

Strategic Overview #

Management Assessment #

Based on the Indo Tech Transformers Limited annual report, here’s a summary of the key aspects identified by management:

I. Key Strategies:

• Cost Optimization: A continuous focus on improving productivity and reducing non-value-added costs to maintain margins in a challenging environment with raw material price pressures.
• Improved Sourcing Strategies: Implementing strategies to secure better raw material supplies and pricing.
• Focus on Quality: Maintaining a commitment to delivering high-quality transformers to gain a competitive edge.
• Synergies with Parent Company (SSEL): Leveraging the relationship with Shirdi Sai Electricals Limited (SSEL) to expand market reach and access business opportunities.
• Technology Upgrades and Digitalization: Initiating the implementation of a new ERP tool and other digitalization projects to improve efficiency, improve processes and management, and support future growth.

II. Competitive Advantages:

• Brand Value: The report indirectly suggests that Indo Tech benefits from established brand recognition and trust.
• Execution Prowess: Implied strength in project execution, although challenges exist with delays.
• Adaptability: Demonstrated ability to adapt to changing market conditions and challenges.
• Parent Company Support: Access to resources and expertise from SSEL.
• Technical and Functional Excellence: Emphasis on the skills and capabilities of their employees, implying a competitive advantage.

III. Market Conditions:

• Strong Demand: The report notes a positive outlook for transformer demand, driven by industrial expansions and renewable energy growth.
• Pent-up Demand: A backlog of orders from industrial expansions and higher capex is leading to increased consumption of power, impacting positively on order books.
• Government Initiatives: Government investments in infrastructure development, smart grids, and renewable energy are boosting the market.
• Price Pressures: Intense competition leads to aggressive pricing among manufacturers, especially from unorganized players.
• Raw Material Volatility: Fluctuating prices of key raw materials (copper, CRGO steel) pose a major challenge.
• Financial Health of DISCOMs: The financial condition of many DISCOMs (Distribution Companies) remains precarious, affecting payment timelines for the utilities.

IV. Challenges:

• Raw Material Price Volatility: Maintaining margins amidst volatile raw material costs, especially copper and CRGO steel.
• Overcapacity in the Industry: Intense competition and aggressive pricing from other players.
• Financial Health of DISCOMs: Delays in payments from state-owned DISCOMs negatively impacting cash flows.
• Low Price Bidding: The competitive pressures resulting from tenders and contract awards that are based on the lowest price creating a “price war” impacting on margins and profits.
• Working Capital Management: The high working capital intensity of the business, coupled with delays in project execution and payment receivables.

V. Opportunities:

• Renewable Energy Growth: Increased demand for transformers in renewable energy integration projects.
• Green Hydrogen Development: Potential for supplying transformers to large green hydrogen production facilities.
• Industrial Expansion: Demand driven by continuous industrial expansion in India.
• Infrastructure Development: Government’s focus on infrastructure creating opportunities to supply transformers for electricity generation, transmission, and distribution projects.
• Synergies with SSEL: Exploiting opportunities arising from the relationship with their parent company.

In summary, Indo Tech’s management identifies a market with significant growth potential but also acknowledges substantial challenges related to price pressures, competition, and the financial health of its customers. Their strategies focus on cost efficiency, quality, and leveraging synergies to navigate these challenges and capitalize on market opportunities.

ESG Ratings #

The provided annual report does not contain ESG ratings from any rating agencies. While the report details various ESG initiatives undertaken by Indo Tech Transformers Limited, it does not include any scores or ratings from recognized ESG rating providers (such as MSCI, Sustainalytics, Refinitiv, etc.).

ESG Initiatives #

Based on the Indo Tech Transformers Limited annual report, here’s a summary of their environmental, social, and governance (ESG) initiatives and sustainability goals. Note that the report provides limited quantitative data, and the descriptions below are based on the qualitative information available.

I. Environmental Initiatives:

• Energy Conservation: Implemented various measures to optimize energy consumption across different operations, including improvements to power factor, centralized air compressor setup, and optimization of high-energy equipment use. Quantifiable achievements (25% increase in power efficiency in the testing lab and 30% reduction in energy consumption per MVA through VPD optimization) were reported.
• Water Conservation: Reduced water usage by 17% by using treated wastewater for toilets and gardening.
• CO2 Emission Reduction: Decreased CO2 emissions from diesel generators by 24% through the installation of diesel particulate filters.
• Paper Reduction: Introduced digital solutions to minimize paper consumption across various operations.

II. Carbon Footprint:

The annual report does not explicitly quantify Indo Tech’s carbon footprint. While reductions in CO2 emissions from diesel generators are mentioned, there’s no overall assessment of their total carbon emissions.

III. Social Initiatives:

• Workplace Safety: Implemented safety measures such as using laser digital distance finders to prevent fall hazards and O2/RH analyzers for confined space work. The company highlights receiving a 3-star rating from the World Safety Organization for OHSE Excellence.
• Employee Development: Emphasized the importance of employee training and development to improve productivity and product quality.
• Employee Relations: The report mentions a temporary production suspension due to a worker dispute and subsequent reconciliation, suggesting an attempt to address employee concerns.

IV. Governance Practices:

• Board Composition: The report details the composition of the Board of Directors, including the presence of independent directors, a woman director, and a non-executive chairman.
• Board Committees: The establishment and functioning of various Board Committees (Audit, Nomination & Remuneration, Stakeholders’ Relationship, and CSR) are detailed, indicating adherence to corporate governance best practices.
• Code of Conduct: The company has adopted a code of conduct for Board members and senior management.
• Vigil Mechanism: A whistleblower mechanism is in place for reporting violations of laws or the company’s code of conduct.

V. Sustainability Goals:

The annual report does not explicitly state specific, measurable, achievable, relevant, and time-bound (SMART) sustainability goals. While various environmental and social initiatives are highlighted, the report lacks clear targets and timelines for achieving sustainability objectives.

Overall:

Indo Tech’s annual report demonstrates some level of commitment to ESG principles through various initiatives, but the disclosure lacks quantitative data and specific sustainability goals for a detailed assessment of their performance in this area. More detailed reporting on their carbon footprint and the establishment of clear sustainability targets are necessary to demonstrate their long-term commitment.

Additional Information #

Operational Metrics #

The Indo Tech Transformers Limited annual report does not provide a specific figure for R&D expenditure nor the total employee count. While the report mentions various process improvements and projects related to environmental protection, ergonomics, and safety, as well as digitalization initiatives, it does not offer a separate line item for R&D spending. Similarly, employee numbers are not disclosed in the report.

Key Events #

Based on the Indo Tech Transformers Limited annual report, the significant events during the fiscal year 2023-24 include:

• Acquisition of Residual Shares: Shirdi Sai Electricals Limited (SSEL), the holding company, acquired the remaining 4.99% of Indo Tech’s equity shares from Prolec GE Internacional, S.De. R.L. De C.V. This resulted in SSEL holding 75% of Indo Tech’s shares. Prolec GE subsequently requested a reclassification of their status from promoter to public, a request that’s pending approval from the stock exchanges at the time of the report.
• Temporary Production Suspension: Operations were temporarily suspended from April 29, 2024, to May 23, 2024, due to a worker dispute regarding Variable Dearness Allowance (VDA). The matter was resolved through conciliation.
• Implementation of New ERP Tool: The company initiated the implementation of a new Enterprise Resource Planning (ERP) system to support its growth. This is part of a wider push towards digitalization.
• Various Process Improvements: A number of process improvements were undertaken to improve environmental protection, ergonomics, and safety across various operations. These initiatives, while not individual events, collectively represent a significant strategic focus.

These events, in combination, shaped Indo Tech’s financial performance and operational activities during the fiscal year.

Audit Information #

Auditor’s Opinion:

The independent auditor, ASA & Associates LLP, issued an unmodified (clean) opinion on Indo Tech Transformers Limited’s financial statements. This means the auditors found the financial statements to be fairly presented in accordance with Indian Accounting Standards (Ind AS) and other generally accepted accounting principles in India. The audit report does, however, highlight two Key Audit Matters: Revenue recognition and the recoverability of trade receivables.

Key Accounting Policies:

The annual report details many key accounting policies, including:

• Foreign Currency Transactions: Transactions in foreign currencies are translated into Indian Rupees at the exchange rates prevailing at the transaction dates or an average rate. Monetary assets and liabilities are translated at the reporting date’s exchange rate.
• Financial Instruments: Financial assets are classified and measured based on their nature and how they’re managed (at amortized cost, fair value through other detailed income (FVOCI), or fair value through profit or loss (FVTPL)). Financial liabilities are measured at amortized cost or FVTPL. Impairment of financial assets is assessed based on expected credit losses.
• Property, Plant, and Equipment (PP&E): Measured at cost less accumulated depreciation and impairment. Depreciation is calculated using the straight-line method over the asset’s useful life.
• Intangible Assets: Measured at cost less accumulated amortization and impairment. Amortization is also on a straight-line basis.
• Inventories: Valued at the lower of cost and net realizable value. Cost is determined using the weighted average method.
• Impairment: Both financial and non-financial assets are tested for impairment.
• Employee Benefits: Short-term benefits are expensed as incurred. Defined contribution plans are accounted for based on contributions. Defined benefit plans use actuarial valuations, and remeasurements are recognized in other detailed income.
• Revenue Recognition: Revenue from the sale of goods is recognized when control is transferred to the customer. Revenue from services is recognized as performance obligations are met.
• Income Tax: Current and deferred taxes are recognized in profit or loss, following applicable tax laws.
• Leases: The company follows IFRS 16 for lease accounting for most leases, except short-term leases and those for low-value assets, where straight line expense recognition is used.
• Cash and Cash Equivalents: Includes cash on hand, demand deposits, and short-term highly liquid investments.

These policies, while summarized here, are described in greater detail within the report’s notes to the financial statements. The specific details and applications of these policies should be referenced from the complete report.