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CHAIRMAN'S COMMUNIQUE

Multi-year Transformational Journey

Your Company generated very strong cash flow from operations of J 914 crore. As a result, we have achieved a significant milestone of achieving netdebt- free status as on 31st March, 2022.

DEAR SHAREHOLDERS,

It gives me pleasure to share with you, your Company’s performance for the year 2021-22.

While it has been a tough environment due to the continuing impact of the pandemic, the unprecedented commodity cost inflation and the repercussions of the Russia-Ukraine war, we have continued to maintain our focus on our transformation journey and our strategic goals. Let me first share an operational update and then cover the more important strategic overview.

During the year under review, our total revenues from operations grew from ₹ 4,585 crore (in the previous year) to ₹ 4,813 crore. Our Profit Before Exceptional Items and Tax declined from ₹ 221 crore in 2020-21 to ₹ 180 crore. Our Profit after Tax declined from ₹ 189 crore in 2020-21 to ₹ 124 crore. However, your Company generated very strong cash flow from operations of ₹ 914 crore. As a result, we have achieved a significant milestone of achieving net-debt-free status as on 31st March, 2022. As you know, addressing our high debt situation has been a key strategic goal for us. We have maintained a laser-focus on generating cash from operations, consistently over the last 12 quarters, which has allowed us to achieve this milestone. Hereon, we will continue to strengthen our balance sheet to support our growth aspirations.

Our Consumer Products segment delivered growth of 13.7% on a full-year basis. The segmental PBIT dropped from ₹ 320 crore in 2020-21 to ₹ 270 crore. This has primarily been due to the commodity costs inflation impacting margins. However, that has not deterred us from continuing to maintain our focus and investments towards new product launches, brand revitalisation and other key initiatives.

Our EPC segment maintained its focus towards execution of the current projects on hand. We continued to drive successful closure of legacy projects in the Power Distribution business and reduced our receivables significantly. Our Power Transmission business commissioned projects during the year. As a testimony to our focus over the past couple of years on project management excellence, our team has successfully executed complex projects in a time-bound and profitable manner. As a testimony to our focus over the past couple of years on project management excellence, our team has successfully executed complex projects in a time-bound and profitable manner. This includes 765 KV Ajmer Phagi TL for PGCIL (ahead of schedule and on a profitable basis) and a highly challenging monopole project for MMRDA that really showcases our capabilities. We have exited the year with a stronger order book that augurs well for the business. On an overall basis, we are confident of the business becoming profitable in the current year and growing profitably hereon.

Our Illumination business has been a clear outperformer in its industry, having clocked 16% revenue growth even as the industry de-grew. More hearteningly, the business has turned around to deliver an operating profit. The turn around is on the back of several new specialised product launches, innovations, key orders wins and better operational execution. In the years to come, we see this business becoming a strong growth driver and margin contributor for us.

On the organisational front we continued to drive many initiatives towards greater institutionalisation and agility of the Company. We undertook a delayering exercise to create a flatter organisation, enhanced our talent pool, embarked upon leadership development initiatives, established a Diversity and Inclusion Council and were re-certified as a 'Great Place To Work, We went live with the first phase of our new ERP system in May, 2022 and will complete the transition in this fiscal, followed by several digital transformation initiatives that are lined up.

During the previous year we announced a scheme of arrangement whereby the Power Transmission and Distribution businesses would be demerged into a separate listed company 'Bajel Projects Limited'. This will result in a corporate structure that is aligned to the distinct needs of the respective businesses and allow for sharper strategic focus on each business, tailored capital structures and agility for each entity to drive growth. This has been a long-standing request from many investors; we have chosen the timing to do this from a position of strength, having cleaned up the legacy issues, so that both entities have a strong balance sheet as well as capable leadership and teams in place.

The Power Transmission and Distribution businesses would be demerged into a separate listed company, 'Bajel Projects Limited'. This will result in a corporate structure that is aligned to the distinct needs of the respective businesses.

At a broader strategic level, we have now achieved a clear milestone in our overall transformation journey. 'Horizon One' of this journey involved resolving the legacy issues, taking various corporate actions, establishing a strong financial foundation, putting in place the right people, processes and systems and creating the framework for our future growth. Despite the challenges of the pandemic as well as the unprecedented external volatility we have demonstrated our ability to execute to this strategic agenda through unwavering pursuit of our goals. We are now at the cusp of embarking on, 'Horizon Two', of this journey. Quite simply, this will be about focusing on establishing operational excellence across all our businesses and functions and delivering market-leading growth over the next 3 years. We have several initiatives lined up to deliver on this agenda and will demonstrate the same unwavering pursuit.

As we continue on our path to business excellence, we are equally committed to introducing sustainability-driven initiatives to ensure that we create meaningful value for all of our stakeholders. Being a responsible organisation, we strive to have a long-term good impact on the environment and communities through concerted efforts.

I would like to acknowledge and thank all our employees and business associates for all their contributions, efforts and faith in driving our agenda through these tough times. I would also like to thank my colleagues on the Board for their support and guidance to the Company. And I remain grateful to you, our shareholders, for trusting us and being a part of the Bajaj Electricals family.

Yours sincerely,

SHEKHAR BAJAJ

Chairman & Managing Director