Linde India Ltd:Annual Report 2023-24 Analysis

Linde India Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History: Linde India Limited, formerly BOC India Limited, was established in 1935. The company’s origins trace back to the British Oxygen Company (BOC), a global industrial gases giant.

Headquarters Location and Global Presence: The headquarters of Linde India Ltd. is located in Kolkata, India. Linde plc, the parent company, has a global presence spanning over 100 countries.

Company Vision and Mission: While Linde India Ltd. does not explicitly publish a separate vision and mission statement distinct from its parent company, it operates under the broader vision of Linde plc, which focuses on being the best performing global industrial gases and engineering company, delivering sustainable value to customers and shareholders. Their mission revolves around providing innovative solutions, reliable supply, and exceptional customer service in the industrial gases and engineering sectors.

Key Milestones in Their Growth Journey:

• 1935: Establishment as BOC India Limited.
• 2013: Renamed Linde India Limited following the merger of Linde AG and Praxair.
• Continual expansion of its product portfolio and geographical reach within India.
• Significant investments in technology and infrastructure to enhance production capacity and efficiency.

Stock Exchange Listing Details and Market Capitalization: Linde India Ltd. is listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The current market capitalization can be found on financial websites like the BSE, NSE, or Bloomberg.

Recent Financial Performance Highlights: Recent financial performance highlights, including revenue, profit, and key ratios, can be found in their annual reports and quarterly results announcements available on the company’s website and regulatory filings.

Management Team and Leadership Structure: The leadership team typically includes a Managing Director, Chief Financial Officer, and other functional heads.

Notable Awards or Recognitions: Linde India Ltd. has received awards and recognition related to safety, sustainability, and operational excellence in the industrial gases sector.

Their Products #

Complete Product Portfolio with Categories: Linde India offers a comprehensive range of industrial, medical, and specialty gases, along with related equipment and services. Key categories include:

• Atmospheric Gases: Oxygen, Nitrogen, Argon
• Process Gases: Hydrogen, Carbon Dioxide, Carbon Monoxide
• Specialty Gases: High-purity gases, calibration gas mixtures, electronic gases
• Medical Gases: Medical Oxygen, Nitrous Oxide, Entonox
• Equipment & Services: Gas supply systems, pipeline services, gas handling equipment, engineering services

Flagship or Signature Product Lines: Oxygen and Nitrogen are core product lines, essential for various industries. Their medical gases, particularly medical oxygen, hold a prominent position in the healthcare sector.

Key Technological Innovations or Patents: Linde focuses on developing technologies for gas production, purification, and application. This includes advancements in cryogenic technologies, gas separation techniques, and application technologies for various industries.

Manufacturing Facilities and Production Capacity: Linde India operates multiple production facilities across India, strategically located to serve key industrial hubs. Production capacity varies by gas type and location.

Quality Certifications and Standards: Linde India maintains various quality certifications, including ISO 9001, ISO 14001, and ISO 45001, demonstrating its commitment to quality, environmental management, and occupational health and safety.

Unique Selling Propositions or Technological Advantages: Linde’s strengths lie in its global technological expertise, reliable supply chain, and comprehensive portfolio of gases and related services. They also differentiate through application technologies and customized solutions for specific industries.

Primary Customers #

Target Industries and Sectors: Linde India serves a diverse range of industries, including:

• Steel
• Healthcare
• Chemicals
• Refining
• Food & Beverage
• Electronics
• Automotive
• Pharmaceuticals

Geographic Markets (Domestic vs. International): Linde India primarily focuses on the Indian domestic market.

Major Client Segments:

• Industrial: Steel, Chemicals, Refining, Manufacturing
• Healthcare: Hospitals, Clinics, Medical Facilities

Distribution Network and Sales Channels: Linde India utilizes a combination of direct sales, distributors, and agents to reach its customers. They also operate a network of retail outlets for smaller volume gas requirements.

Major Competitors #

Direct Competitors in India and Globally: Key competitors in India include:

• INOX Air Products
• Air Liquide India Holding Pvt Ltd

Globally, the main competitor is:

• Air Products & Chemicals

How They Differentiate from Competitors: Linde India differentiates itself through its global technology access, a broad product portfolio, reliability, application expertise, and a strong focus on customer service.

Industry Challenges and Opportunities:

• Challenges: Fluctuations in raw material prices, competition from imports, evolving regulatory environment.
• Opportunities: Growing industrial sector, increasing demand for medical gases, infrastructure development, adoption of cleaner technologies, and government initiatives like “Make in India”.

Future Outlook #

Expansion Plans or Growth Strategy: Linde India’s growth strategy focuses on expanding its production capacity, strengthening its distribution network, developing new applications for its gases, and leveraging its technological capabilities.

Sustainability Initiatives or ESG Commitments: Linde is committed to sustainability and ESG practices, focusing on reducing its carbon footprint, conserving resources, and promoting safety. Initiatives include developing energy-efficient technologies, reducing emissions, and promoting responsible use of gases.

Industry Trends Affecting Their Business: Key trends shaping the industrial gases market include:

• Growing demand from emerging economies.
• Increasing focus on energy efficiency and emission reduction.
• Adoption of Industry 4.0 technologies.
• Rising healthcare expenditure and demand for medical gases.

Long-Term Vision and Strategic Goals: Linde India aims to maintain its position as a leading industrial gases supplier in India, driving growth through innovation, operational excellence, and a strong commitment to sustainability. They plan to leverage their global expertise to meet the evolving needs of the Indian market and contribute to the country’s economic development.

Comprehensive Performance Overview #

3-Year Trend Analysis of Key Financial Metrics #

• Revenue: FY24 revenue (Rs. 27,687 million) decreased compared to the 15-month period of FY23 (Rs. 31,355 million). However, there is decent growth of 6.4% year on year.
• EBITDA: FY24 EBITDA (Rs. 7,793 million) showed a 7.2% year-on-year growth, when comparing with similar 12 months period ended 31 March 2023, indicating improved operational efficiency.
• Profit After Tax (PAT): FY24 PAT (Rs. 4,263 million) decreased compared to the 15 months period ended 31 March 2023 and Rs. 4,719 million for similar 12 months period ended 31 March 2023. The lower PAT was mainly on account of the tax reversal recorded in the previous period.
• Capital Employed: Increased from Rs. 26,910.2 million as of March 31, 2023, to Rs. 34,345.3 million as of March 31,2024.

Business Segment Performance #

• Gases & Related Products: FY24 revenue (Rs. 20,006 million) showed a 10.2% year-on-year growth, driven by strong demand and pricing across all segments. The segment benefited from growth in steel, healthcare, and specialty gases.
• Project Engineering Division (PED): FY24 revenue (Rs. 7,681 million) was marginally lower by 2.2% year on year. The segment demonstrated a healthy order book, and remains resilient. PED order book as of March 31, 2024, stands at Rs. 20,003.90 million.

Major Strategic Initiatives and Their Progress #

• Digital Transformation: Ongoing, with initiatives across sales, operations, distribution, and customer experience. Digital initiatives have shown productivity boost, with AI and machine learning contributing significantly.
• Renewable Energy Sourcing: Strategic investments were made in Zenataris Renewable Energy Private Limited and other entities to secure renewable power under a captive mechanism, aiming for cost savings and sustainability.
• Capacity Expansion: Commissioned a second merchant ASU plant in Dahej, Gujarat.
• Customer Experience: ISO 10002:2018 & 10004:2018 certified organisation and evaluation done on metrics such as Net Promoter Score (NPS), Customer Effort Score (CES) and Customer Satisfaction Index (CSI).

Risk Landscape Changes #

• Geopolitical Risks: Increased focus on managing risks from global geopolitical instability and supply chain disruptions (e.g., Russia-Ukraine conflict, Red Sea crisis).
• Economic Risks: Monitoring recessionary pressures in US and EU, import competition, and commodity price fluctuations.
• Cybersecurity Risk: Prioritized, with regular reviews and digital training initiatives to improve processes, controls and make them safer.
• Competition Risk: Increased due to addition of captive and merchant ASU capacity.
• Climate Change Risk: Addressed through strategic risk workshops and mitigation plans.
• Regulatory Changes Risk: Being addressed by the company.

ESG Initiatives and Metrics #

• Environmental Responsibility: Scope 1 and 2 GHG intensity decreased by 27% year-over-year. Investment in renewable energy (solar and wind) through captive mechanisms and long-term contracts.
• Community Engagement: Rs. 80 million spent on CSR during FY24. Focus areas include road safety, healthcare, education, and disaster relief.
• Diversity and Inclusion: Women Leadership Programme (IGNITE) was concluded.

Management Outlook #

• India’s GDP growth is projected to be robust and strong domestic demand, with investments in infrastructure.
• The Company is prioritizing digitalization for growth and cost efficiency.
• Expect continued expansion of the Indian economy to the US $7 trillion mark and a reduction in risk factors.
• Continued focus on renewable energy.

Detailed Analysis #

Balance Sheet Analysis #

3-Year Comparative Analysis (Standalone Data) #

Segment Assets #

(Rs. in millions)

Segment Liabilities #

(Rs. in millions)

Equity #

(Rs. in millions)

Note: Linde changed to Apr-Mar year-end cycle. FY2022-23 represents 15 months period. The year ended 2021 cannot be compared directly.

Significant Changes in Major Line Items (>10% YoY) #

(Standalone Data)

• Other Non-Current Assets: Increased by Rs.1,863.29 million (70.25%) from Rs. 2,652.50 million to Rs. 4,515.79 million.
• Cash and cash equivalents: Decreased by Rs.2,077.93 million (17.51%) from Rs. 11,866.09 to Rs. 9,788.16 million.
• Trade Receivables: increased by Rs.796.18 million (19.83%) from Rs.4,014.01 to Rs. 4,810.19 million.
• Capital work in progress Increased by 114.65%

Working Capital Trends #

(Standalone Data)

• Working capital has decreased, primarily due to a decrease in cash and cash equivalents combined with increases in trade payables.

Debt Structure and Maturity Profile #

(Standalone Data)

• Total Borrowings: The company reports zero outstanding borrowings as of 31 March 2024.
• Lease Liabilities:
  • Current: Rs. 15.61 million
  • Non-Current: Rs. 191.29 million.

Off-Balance Sheet Items #

• Contingent Liabilities: The data provided only summarizes the existence of litigations and other claims, but not amounts. Therefore, a detailed analysis of off-balance sheet items isn’t fully possible with the provided extract.
• Operating Leases (as lessor): The company has future minimum lease payments receivable under non-cancellable operating leases. These are disclosed in Note 44, but not quantified in a balance-sheet relevant way for this specific analysis section.

Cash Management: Financial Analysis #

Cash Flow and Liquidity Analysis #

Detailed OCF, ICF, FCF Components (Rs. in millions) #

• OCF (Operating Cash Flow):

  • Year ended 31 Mar 2024: 4,369.55
  • 15 months ended 31 Mar 2023: 6,291.84

• ICF (Investing Cash Flow):

  • Year ended 31 Mar 2024: (5,394.27)
  • 15 months ended 31 Mar 2023: (3,064.22)

• FCF (Financing Cash Flow):

  • Year ended 31 Mar 2024: (1,053.21)
  • 15 months ended 31 Mar 2023: (1,194.46)

Working Capital Management Efficiency #

• Overall:
  • Net Working Capital decreased from Rs. 11,146.7 million (Mar 2023) to Rs. 8,957.1 million (Mar 2024).
  • Net working capital turn over ratio decreased from 2.81 to 3.09.

Capex Analysis by Segment (Rs. in millions) #

• Capital work in progress increased significantly from Rs. 2,252.29 million (Mar 2023) to Rs.4,834.75 million (Mar 2024), indicating substantial ongoing investment.

Dividend Trends #

• Dividends Paid:

  • Year ended 31 Mar 2024: Rs. 1,023.41 million.
  • 15 months ended 31 Mar 2023: Rs. 1,151.34 million.

• Dividend Per Share:

  • Proposed for year ended 31 Mar 2024: Rs. 12 per share (including special dividend)

Liquidity Position #

• Cash and cash equivalents decreased from Rs. 11,866.09 million (Mar 2023) to Rs. 9,788.16 million (Mar 2024).

Key Performance Indicators #

Profitability Ratios (3-Year Trends) #

Return on Equity (ROE) #

• Mar'24: 13.14%
• Mar'23: 18.46%
• 2021: 7.1% *Significant decline in current year. Sharp increase from FY 2021 to FY 2023.

Return on Assets (ROA) #

• Mar'24: 12.10%
• Mar'23: 14.16%
• 2021: Not Directly Computable *Decline can be seen in ROA.

Return on Invested Capital (ROIC) #

• Mar'24: 16.01%
• Mar'23: 18.72%
• 2021: 10.5% *ROIC declined.

Operating Margin #

• Mar'24: 20.9%
• Mar'23: 19.8%
• 2021: 15.7% *Growth in margins can be seen.

Net Profit Ratio #

• Mar'24: 15.40%
• Mar'23: 17.09%
• 2021: 15.7%

Liquidity Metrics #

Current Ratio #

• Mar'24: 1.87
• Mar'23: 2.19 *Decline, indicates decreased ability to cover liabilities.

Efficiency Ratios #

Asset Turnover #

• Mar'24: 1.29
• Mar'23: 1.60
• 2021: 0.72 *Decreased significantly.

Inventory Turnover #

• Mar'24: 11.95
• Mar'23: 17.18
• 2021: Not Directly Computable *Significantly decreased.

Receivables Turnover #

• Mar'24: 6.28
• Mar'23: 7.61
• 2021: Not Directly Computable *Decreased.

Leverage Metrics #

Debt/Equity #

• Mar'24: 0%
• Mar'23: 0%
• 2021: 5.1% *Company is debt free.

Interest Coverage Ratio #

• Not applicable, as the company is debt free.

Working Capital Ratios #

Net Capital Turnover Ratio #

• Mar'24: 3.09
• Mar'23: 2.81
• 2021: Not Directly Computable

Linde India Limited Business Segment Analysis #

Segment Performance Overview #

Revenue and Profitability #

• Gases, Related Products & Services: FY2023-24 revenue was Rs. 20,006 million, a 10.2% year-on-year growth. Segment profit was Rs. 4,771.19 million.
• Project Engineering Division (PED): FY2023-24 revenue was Rs. 7,681 million, a slight decrease of 2.2% year-on-year. Segment profit was Rs. 1,034.77 million.
• Overall: Total revenue for FY2023-24 grew by 6.4% from Rs.26,013 million in previous year.
• EBITDA of Rs. 7,793 million showing a growth of 7.2% from the Rs. 7,272 in previous year.

Market Share and Competitive Position #

• The Gases business is consolidating and expanding, particularly in the glass/frit and chemical industries in Gujarat.
• The Company maintained the lead in sales and distribution network.
• The Project Engineering Division maintains a healthy order book.
• New players are entering the merchant market, increasing competition.

Key Products/Services Performance #

• Gases: Strong demand across key sectors (steel, glass, chemicals) and pricing discipline drove growth. Liquid oxygen and argon saw increased merchant volume. The Onsite segment benefited from increased demand from steel customers. Packaged Gases served high demand in industrial products, helium, and special gases, with good pricing. Healthcare showed growth in Liquid Medical Oxygen demand.
• PED: Delivered 6 ASUs and 4 Nitrogen plants. Key projects include ASUs for Kirloskar Ferro Industries, NMDC, and others, along with nitrogen plants for various clients. The division also manufactures cryogenic vessels.

Geographic Distribution and Market Penetration #

• Gases: Operates a nationwide network of production facilities and filling stations, giving it the largest sales and distribution network in India.
• The Company has started sourcing renewable energy at its ASU sites at Dahej, Ludhiana and Selaqui.
• The company installed Rooftop solar PV at various sites: Pune, Dabaspet, Kolkata HO, Uluberia, PMWII, Taloja ASU & PGP.
• The Eastern Region of India presents significant growth opportunities, particularly in the steel sector.
• The Healthcare business has a strong presence in the public sector in Uttar Pradesh, Chhattisgarh, and Bihar.
• PED: The division inaugurated a new workshop in Jamshedpur in March 2024, to support the increasing demand for cryogenic vessels. Projects are executed across various sectors, including steel, oil & gas, and for research organizations like DRDO, BARC, and IPR.

Operational Efficiency Metrics #

• Gases: Ongoing optimization of plant operations to improve specific power consumption. Productivity initiatives were implemented at various sites (cooler replacement, valve rectification, loss reduction). Renewable energy sourcing is being pursued to improve cost efficiency.
• Distribution: Digital initiatives in distribution have enhanced planning, driver training, and communication, improving delivery efficiency by 5% yoy, and capacity utilization of tanker by 3%.
• EBITDA grew by 7.1% from comparable 12 month period from previous year.
• Overall safety performance improved avoiding any “InControl” incident.
• PED: The Project Engineering Division inaugurated a new, larger workshop in Jamshedpur in March 2024, to meet the increasing demand for cryogenic vessels, and to improve operational efficiency.

Growth Initiatives and Challenges #

• Growth Initiatives:
  • Digital transformation initiatives across sales, marketing, operations, distribution, procurement, and customer experience.
  • Expansion of the healthcare business through medical gas pipeline systems, LIV cylinder facilities, and new product introductions (e.g., NOxBOXi®).
  • Focus on high-margin products and customized application PSOs in various sectors.
  • Strategic investments in renewable energy for cost savings and sustainability.
  • PED expansion with a new workshop and a strong focus on in-house ASU projects.
• Challenges:
  • Fragile geopolitical situations and potential impacts on supply chains and economic growth.
  • Recessionary pressures in the US and EU could affect export-oriented sectors.
  • Potential for increased competition in the merchant market from new players.
  • Dependence on sectors like steel, which can be cyclical.
  • The El Nino effect on agriculture and rural consumption.

Risk Framework #

Strategic Risks #

Gases, Related Products & Services #

• Severity: High, due to capital-intensive nature and reliance on key sectors (steel, chemicals, refinery).
• Likelihood: Medium, linked to economic cycles and sectoral growth.
• Trend: Increasing, with rising competition in the merchant market and changing customer preferences (BOO model losing favor).
• Mitigation Strategies: Focus on application-led gas sales, enhanced service levels, customized application PSOs.
• Potential financial impact: Lower profit if customer prefers BOO model

Project Engineering #

• Severity: High, dependence on large-scale projects and cyclical nature of investments.
• Likelihood: Medium, influenced by infrastructure capex trends and global supply chain diversification.
• Trend: Stable, supported by a healthy order book (Rs. 20,003.90 million as of March 31, 2024) but vulnerable to economic downturns.
• Mitigation Strategies: Turnkey solutions, U-stamp certified facility for proprietary equipment, focus on diverse sectors.

Operational Risks #

Gases, Related Products & Services #

• Severity: High, related to plant operations, specific power consumption, and distribution.
• Likelihood: Medium, with ongoing efforts to improve efficiency and safety.
• Trend: Improving, with a 27% reduction in Scope 1 and 2 GHG intensity year-over-year.
• Mitigation Strategies: Plant optimization, renewable energy sourcing (long-term agreements), digital solutions (virtual reality-based training, mobile app for drivers), cooler replacement, passing valve issue, rectifications, loss reduction.
• Control Effectiveness: Improving, evidenced by a decrease in commercial vehicle incidents and stable lost work day cases.
• Potential Financial Impact: Cost savings from renewable power procurement, reduced energy consumption, and improved operational efficiency. Increased costs from constrained helium supply, fluctuating by 10% to 20%.

Project Engineering #

• Severity: Medium, related to project execution, commissioning, and equipment manufacturing.
• Likelihood: Low to Medium, mitigated by IMS certification and established processes.
• Trend: Stable, supported by successful commissioning of multiple ASUs and Nitrogen plants.
• Mitigation Strategies: IMS certification, in-house manufacturing of cryogenic vessels, expansion of workshop in Jamshedpur.
• Potential financial impact: High asset turnover if projects are not delivered timely.

Financial Risks #

Gases, Related Products & Services #

• Severity: Medium impact.
• Likelihood: Low, due to “zero” outstanding borrowing.
• Trend: Decreasing, with revenue growth (10.2% year-on-year for Gases Division) and strong pricing discipline.

Project Engineering #

• Severity: Medium impact.
• Likelihood: Low, due to “zero” outstanding borrowing.
• Trend: Stable

Compliance/Regulatory Risks #

Gases, Related Products & Services & Project Engineering #

• Severity: High, related to potential non-compliance with SEBI LODR regarding related party transactions.
• Likelihood: Currently indeterminate, pending SEBI proceedings.
• Trend: Uncertain, pending the outcome of the ongoing SEBI investigation.
• Mitigation Strategies: Legal opinions sought, appeal filed with Securities Appellate Tribunal (SAT).
• Control Effectiveness: Challenged, due to differing interpretations of materiality thresholds for related party transactions.
• Potential Financial Impact: Indeterminate pending SEBI proceedings. The SAT Order dated May 22, 2024, set aside the SEBI Interim Order, but final consequences are not yet determinable.

Linde India Limited: Financial Analysis #

Gases, Related Products & Services #

Long-Term Strategic Goals and Progress #

• Sourcing renewable energy via long-term contracts and captive farms (solar and wind).
• Agreements for renewable energy sourcing at Dahej, Ludhiana, and Selaqui ASU sites.
• Investment in Rooftop solar PV at various plants.

Competitive Advantages and Market Positioning #

• Market leadership sustained through application-led gas sales and enhanced service levels.
• One of the largest air separation plants in Jamshedpur.
• Expansion into the glass/frit and chemical industries in Gujarat.

Innovation Initiatives and R&D Effectiveness #

• Plant operations optimisation for improved specific power.
• Productivity initiatives like cooler replacement, passing valve issue rectification, and loss reduction.
• Virtual-reality-based driver training methodology.

Capital Allocation Strategy #

• Focus on building density.
• Investments in distribution assets, storage networks, and cylinders.

Management’s Track Record #

• Total revenue from operations stood at Rs. 20,006 million registering a 10.2% growth.
• Management track record is good with several initiatives resulting in profitability growth.

Organisational Changes and their impact #

• Merchant plant ROC (Remote Operations Centre) established at Jamshedpur.

Project Engineering Division (PED) #

Long-Term Strategic Goals and Progress #

• Focused on designing, engineering, supplying, installing, testing, and commissioning Air Separation Units (ASUs) and related projects on a turnkey basis.
• New, larger workshop inaugurated in Jamshedpur in March 2024 to meet the increasing demand for cryogenic vessels.

Competitive Advantages and Market Positioning #

• Maintains IMS certification since 2020.

Innovation Initiatives and R&D Effectiveness #

• U-stamp certified facility in Kolkata.
• Produces a wide range of proprietary equipment, including distillation columns for air separation plants, cryogenic liquid storage tanks, ambient and steam bath vaporizers, process vessels, small-sized cold boxes, containerized micro plants for filling cylinders.

Management’s Track Record #

• Successfully delivered six ASUs and four Nitrogen plants in FY2023.
• Robust order book.

ESG Framework #

Environmental Metrics and Targets #

• Gases, Related Products & Services: Achieved a 27% reduction in Scope 1 and 2 greenhouse gas (GHG) intensity year-on-year. Strategic investments were made in renewable energy procurement through a captive mechanism.
• Project Engineering: New workshop inaugurated in Jamshedpur in March 2024 to meet the increasing demand for cryogenic vessels.
• Committed to a 35% reduction in GHG emissions intensity by 2028. Waste management practices comply with state and central pollution control norms.

Social Responsibility Programs #

• Gases, Related Products & Services: Includes healthcare, providing medical oxygen and related services. Initiatives include driver upskilling, road safety programs, and vocational training for women.
• Project Engineering: Collaborations with Gram Sathi, Ayukua Sakti, Participatory Learning and Action Network, and Savera Foundation.
• CSR spend of Rs. 80 million in FY 2023-24, impacting community drivers, students, women, underserved children, adolescent girls, farmers, and youth.
• Employees volunteered 1900 hours.

Governance Structure and Effectiveness #

• All Segments: The Board has a Risk Management Committee and an Audit Committee. Risk workshops were conducted, and the Board reviews action plans for key risks quarterly. A Whistle Blower Policy and a Policy on Prevention of Sexual Harassment are in place.
• The Nomination and Remuneration Committee reviews the process and criteria for evaluating the performance of the board, committees, chairman and directors.
• Independent directors confirmed they meet the independence criteria.
• Compliance with Secretarial Standards and SEBI Listing Regulations are maintained.

Sustainability Investments and ROI #

• Gases, Related Products & Services: Investments were made in renewable power procurement and solar PV installations. The Company aims for cost savings from lower tariffs related to these investments.
• Project Engineering: Investment made in a new, larger workshop in Jamshedpur to meet rising demand for cryogenic vessels.
• Capex of 0.01% was made for improvements of environmental impacts.

Regulatory Compliance and Future Preparations #

• All Segments: The Company adheres to multiple environmental, health, safety, and quality standards, including ISO certifications (ISO 10002:2018, 10004:2018, ISO 9001:2015, ISO 14001:2015, ISO 45001:2018, and ISO/IEC 17025:2017). Compliance with the Sexual Harassment of Women at Workplace Act, 2013 is affirmed. The Company also has a comprehensive data privacy policy.
• The company has obtained a reasonable assurance on the BRSR Core.

Gases, Related Products & Services Segment #

Management Guidance and Assumptions #

Management assumes continued high gas & liquid demand across all key sectors, driven by steel, glass, chemicals, and a surge in helium demand. Pricing discipline is a core management assumption. The onsite segment is assumed to face incremental demand from steel customers.

Market Growth Forecasts #

Steel sector growth is expected to continue driving higher gas consumption. The healthcare segment is forecasted to see increased demand for Liquid Medical Oxygen from both private and government hospitals.

Planned Strategic Initiatives #

Focus on building density and sustaining market leadership through application-led gas sales and enhanced service levels. Expansion into the glass/frit and chemical industries in Gujarat. Exploration of innovative operating models to meet steel sector demand in the Eastern Region. Sustained focus on the ophthalmic mixes and solar segments. Installation of multiple Liquid Medical Oxygen installations and 22 Healthcare PSA installations.

Capital Expenditure Plans #

Strategic investment in Zenataris Renewable Energy Private Limited for renewable power procurement was made. Multiple rooftop Solar PV installations across various sites. Investment in expanding footprint in the Healthcare segment.

Efficiency Improvement Targets #

Continued optimization of plant operations to improve specific power consumption, with multiple initiatives to reduce energy consumption and improve profitability. Sourcing of renewable energy and installation of rooftop solar PV to achieve cost savings.

Potential Challenges and Opportunities #

• Challenges: Supply chain constraints on helium. Geopolitical risks (Russia-Ukraine conflict and Red Sea crisis). Increased competition from new players in the merchant market and pressure on margins due to predatory pricing.
• Opportunities: Increased demand in the specialty steel segment. Growing public healthcare segment demand. Customized Application PSOs.

Scenario Analysis and Sensitivity to Key Assumptions #

The company is prioritizing digitalization to enhance productivity and cost reduction. The Company has also signed a long term agreement for renewable energy sourcing at its ASU sites. A 10% appreciation/depreciation of the foreign currencies with respect to functional currency would result in a decrease in the company’s net profit.

Project Engineering Division (PED) Segment #

Management Guidance and Assumptions #

Management assumes a healthy order book, continued growth in CAPEX projects pipeline.

Market Growth Forecasts #

The division expects to ride cyclic momentum with growth in the industrial sector. Strong domestic demand, public infrastructure investments, and growing financial sector driving growth.

Planned Strategic Initiatives #

Focus on design, supply, installation, and commissioning of medium to large-tonnage ASUs, nitrogen plants, and pressure swing adsorption (PSA) systems. Manufacturing of cryogenic vessels for internal use and external sales. Expansion with a new, larger workshop in Jamshedpur to meet increasing demand for cryogenic vessels.

Capital Expenditure Plans #

New workshop in Jamshedpur to expand production capacity. Investment in in-house project orders, including a Nitrous oxide plant, Nitrogen plant and a 1000 TPD ASU.

Efficiency Improvement Targets #

Maintenance of IMS certification, commitment to quality, environmental responsibility, and occupational health and safety standards.

Potential Challenges and Opportunities #

• Challenges: Cyclical nature of project engineering business.
• Opportunities: Robust order book, strong pipeline for onsite and in-house ASU projects.

Scenario Analysis and Sensitivity to Key Assumptions #

The company is committed to innovation, expansion, and delivering exceptional value to clients. The Company is also expanding its footprint in the glass/frit and chemical industry in the state of Gujarat.

Audit and Compliance Analysis #

Auditor’s Opinion and Qualifications #

• Qualified Opinion: The statutory auditors (Price Waterhouse & Co. Chartered Accountants LLP) issued a qualified opinion on both the standalone and consolidated financial statements for the year ended March 31, 2024.
• Basis for Qualification: The qualification relates to the Holding Company’s method of assessing materiality for related party transactions (RPTs) under SEBI LODR. Management applies a 10% threshold of annual consolidated turnover to each contract individually, while SEBI, in an Interim Ex Parte Order, contends that the threshold must be applied to all contracts of similar nature with a related party on an aggregate basis. The Securities Appellate Tribunal, in its Order dated May 22, 2024 (‘SAT Order’), has set aside the Interim Order.
• Emphasis of Matter: Emphasis of Matter was issued for uncertainties related to SEBI’s ongoing investigation.

Key Accounting Policies and Changes #

• New and Amended Standards Adopted: The Company adopted the Companies (Indian Accounting Standards) Amendment Rules, 2023, effective April 1, 2023. These amendments did not have a material impact on the amounts recognised in prior and current periods.
• Accounting Policy Disclosures: Amendments to Ind AS 1 impacted the disclosure of accounting policies, though the policies themselves did not change.
• Revenue Recognition:
  • Revenue from the sale of products is recognized upon the transfer of control to the customer, which generally occurs upon receipt of goods.
  • Revenue from services is recognized as the services are rendered.
  • Project Engineering Division (PED) revenue is recognized over time using the percentage-of-completion method, requiring estimation of contract costs and margins.
• Consistent Application: Accounting policies have been applied consistently across reporting periods.

Internal Control Effectiveness #

• Adequate Internal Financial Controls: The auditors, based on their procedures and those of internal auditors, M/s Suresh Surana & Associates LLP, found the internal financial controls over financial reporting to be operating effectively.
• Audit Trail Feature: The Company has an audit trail feature in its accounting software that operated throughout the year. Exception made to modification done by certain users with specific access and direct database changes.

Regulatory Compliance Status #

• General Compliance: The Company has generally complied with statutory provisions, with the material exception of a disagreement with SEBI regarding the calculation of the materiality threshold for related party transactions.
• Secretarial Audit: The Secretarial Auditor’s Report dated 28 May 2024 confirms general compliance, except as described in point 4 above.
• SEBI LODR Compliance: The Company asserts compliance with SEBI Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, based on legal opinions obtained, differing from SEBI’s interpretation in a specific matter.
• Dividend Distribution Policy: The Board’s recommended dividend is in line with the Company’s Dividend Distribution Policy.
• Cost Records: Cost records are maintained.
• Zero Borrowing: Zero outstanding borrowing. Credit rating from CRISIL withdrawn.

Legal Proceedings and Potential Impact #

• Ongoing SEBI Investigation: SEBI is investigating the Company’s financial information and business transactions. The Company and Independent Directors have filed Writ Petitions before the Hon’ble Bombay High Court. The Securities Appellate Tribunal has set aside the Interim Order vide its Order dated 22nd May 2024. The ultimate outcome and potential impact are presently not ascertainable.
• Pending Litigations: The Company is involved in various litigations, primarily relating to excise duty, service tax, sales tax/VAT, and income tax. The potential impact of these litigations is disclosed in the financial statements.

Related Party Transactions #

• Transactions at Arm’s Length: All related party transactions during the year were in the ordinary course of business and on an arm’s-length basis.
• No Material Transactions Exceeding Threshold: According to the Company, no related party transaction exceeded the materiality threshold of 10% of the annual consolidated turnover of the Company, using their interpretation of the regulations.
• Disclosure: Related party transactions are disclosed in Note 44 of the Standalone Financial Statements.

Subsequent Events #

• SEBI Interim Order and SAT Order: The Securities and Exchange Board of India (SEBI) issued an Interim Ex-Parte Order on April 29, 2024, regarding related party transactions. The Securities Appellate Tribunal (SAT), on May 22, 2024, set aside the Interim Order.
• Proposed Dividend: The Board recommended a dividend of 120% (Rs. 12/- per share), subject to shareholder approval.

Accounting Quality and Regulatory Risk Assessment #

• The quality is slightly affected by the material uncertainty of SEBI’s investigations.
• The ongoing SEBI investigation and the differing interpretations of RPT materiality represent a significant regulatory risk.