Elecon Engineering : Proceedings of 62nd Annual General Meeting held on June 28, 2022

62nd Annual General

Meeting

Time : 03.00 p.m.

Date : 28-06-2022

Dear Shareholders, Ladies & Gentlemen

I warmly welcome you all to the 62nd Annual General Meeting of your Company on behalf of the Board of Directors, the Management and the Employees of the Company.

I am sure that all of you have received and gone through the Annual Report for fiscal 2022. We have tried to lay out the business performance and outlook of the Company with an aim to help you in gaining a sense of the future direction in which the Company is headed. With your kind permission, could I take the Directors Report and Audited Accounts for FY22 as read.

ECONOMIC OUTLOOK

The global economy is estimated to have expanded by 6.1% in 2021, one of the highest rates in recent times, on the back of sharp rebound in consumer spending and investment on the back of easing restrictions and supportive fiscal and monetary policies. Manufacturing activity and global trade rebounded strongly with rise in consumer and business confidence despite shipping and logistics constraints and supply chain issues. However, supply constraints due to global labour and input shortages combined with a rapid increase in global demand post lifting of lockdown restrictions led to higher price inflation. Moreover, ongoing geopolitical tension has only aggravated the inflationary environment and put brakes on the strong growth momentum. According to IMF, the global growth is likely to moderate to 3.6% in 2022 due to increase in policy rates and geopolitical tensions.

The Indian economy is estimated to have grown by 8.7% in FY22 surpassing pre-pandemic levels on the back of strong recovery in farm, mining, manufacturing and agriculture. Economic activities increased at a faster pace amidst rise in consumer and business confidence, low interest rate environment and higher capital expenditure by Government. High frequency economy indicators such as power consumption, railway freight, GST collections, e-way bills, etc. signaled widespread economic recovery. However, growth momentum is likely to moderate going forward due to ongoing supply chain issues and the expected adverse impact of rise in commodity prices fueled by geopolitical tensions. According to IMF, the Indian economy is expected to grow by 8.2% in FY23 as growth momentum is likely to moderate due to the ongoing geopolitical conflict which has only aggravated the supply chain issues and inflationary pressures. As such, RBI is likely to continue to hike policy rate to tame inflation which could impact grow prospects to some extent.

The Indian engineering industry is witnessing signs of recovery led by favourable government policies such as Production Linked Incentive (PLI) along with increased capex outlay announced in the recent union budget. Increased government expenditure is likely to propel private capex in construction and manufacturing industries such as automobiles, metals, engineering, etc.

YEAR AT A GLANCE - COMPANY PERFORMANCE

Let me turn my attention now to the performance of the year gone by.

We witnessed strong set of performance in Fiscal 2021-22 despite disruptions caused by the second wave of the Covid- 19 pandemic. The Gear business continued to witness positive performance on the back of strong demand environment resulting in healthy order inflows. The Material Handling business too saw significant improvement in performance due to our focus on profitable product business and contract closure of legacy projects.

On a business front, Elecon's gear business witnessed strong performance on the back of healthy order inflows and favourable product mix and also due to increased focus towards increasing penetration in the international markets. During the fiscal 2022, the Company has an order backlog of Rs. 410 Crores for execution in the near to medium term. In the MHE business, the Company continued its focus on improving profitability and liquidity. The pending order book for MHE business as on 31st March, 2022 stands at Rs.127 Crores.

At the Company level, we continued to focus on further cost reduction, optimum utilization of existing capacity and enhancing operational efficiency. We are witnessing positive momentum in the order intake and revenue in the US, Latin America and Canada operations. It is heartening to note that all our overseas entities have strong profitability in FY22 and we expect sustainability of profitability going forward. We have fully repaid debt and other bank facilities in overseas entity to the tune of Rs. 95 Crores in FY22. We are planning to invest in marketing and business development as part of the

strategic initiative towards establishing global brand identity and enhance business growth across all overseas entities.

DIVIDEND

The Board of Directors of the Company has also recommended Rs. 1.00/- (i.e. 50%) and additionally Special Dividend of Rs. 0.40/- (i.e. 20%), to mark 70 years of Elecon Brand, which aggregates to Rs. 1.40/- (i.e. 70%) per Equity share for its shareholders. We will continue to work towards getting maximum value for our shareholders in the coming years.

OUTLOOK

Despite the ongoing geopolitical tension which has aggravated the supply chain issues and inflationary pressures, the Indian economy is poised for growth led by boost in consumption and investment demand supported by various favourable measures such as PLI scheme and massive capital expenditure outlay announced by the government. However, hike in policy rates, increase in global commodity prices, high freight costs due to supply chain issues and resurgence of COVID-19 with new variants could act as major headwinds. Nonetheless, we are optimistic on future prospects and remain confident of improved performance going forward due to resilient demand environment in our end user industries.

ACKNOWLEDGEMENT

I would like to express my gratitude towards our Board Members for their constant guidance and support in our

pursuit of maximizing long-term shareholder value. I would also like to thank all our shareholders and customers for their continuous support and faith in the Company. Finally, I would like to thank our employees for their invaluable contribution.

As I close, I would like to take this opportunity to thank you all for your continuous support and faith in the Company and its management. We shall continue to work towards taking the Company to greater heights and achieve many more milestones and business goals.

Thank you for your attention!

PRAYASVIN PATEL

CHAIRMAN & MANAGING DIRECTOR

Date : 28.06.2022

Place : Vallabh Vidyanagar