VARROC

Varroc Engineering Limited Regd. & Corp. Office L-4, MIDC, Industrial Area Tel + 91 240 6653700 email: varroc.info@varroc.com Waluj, Aurangabad 431 Fax + 91 240 2564540 www.varroc.com 136, Maharashtra, India CIN: L28920MH1988PLC047335 VARROC/SE/INT/2022-23/54 August 12, 2022 To, The Manager- Listing The Manager – Listing The Listing Department, The Corporate Relation National Stock Exchange of India Department, Limited Bombay Stock Exchange Limited Exchange Plaza, Plot No. C/1, G Block, Phiroze Jeejeebhoy Towers, Bandra-Kurla Complex, Dalal Street, Fort, Bandra (East), Mumbai-400051. Mumbai-400001. NSE Symbol: VARROC BSE Security Code: 541578 Dear Sir/Madam, Sub: Investor Presentation - Financial Results Q1/FY 2022-23 Please find enclosed a copy of Investor Presentation on the Unaudited Financial results (Consolidated & Standalone) for the quarter ended on June 30, 2022. Kindly take the same on record and note the compliance. For Varroc Engineering Limited Ajay Sharma Group General Counsel and Company Secretary Encl: a/a Varroc Engineering Ltd Financials Results Q1FY23 July 2022 Disclaimer This presentation may include statements which may constitute forward-looking statements. All statements that address expectations or projections about the future, including, but not limited to, statementsabout the strategy forgrowth,business development,market position, expenditures, andfinancialresults, are forwardlookingstatements.Forwardlookingstatements are basedoncertain assumptions and expectations of future events and involves known and unknown risks, uncertainties and other factors. The Company cannot guarantee that these assumptions and expectations are accurate or exhaustive or will be realised. The actual results, performance or achievements, could thus differ materially from those projected in any such forward-looking statements. 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Confidential Content 1. Highlights 2. Industry Performance 3. Financials 4. New Business Win 5. Opportunity in Mega Trends 6. Update on Discontinued Operations 7 Appendix: About Varroc Engineering Confidential Highlights Q1 FY23 1. Started mass production of both Traction Motor & Traction Controller for our Anchor Customer 2. In record time(3 months) developed EFI as per the design of the customer and started supply 3. Revenue growth for the Quarter on YoY basis for Continuing Operations (excluding divestment) is 36.3% which outperforms market growth 4. EBITDA for Continuing Operations sequentially improves by 210 bps to 8.2% in Q1 FY23 5. Lifetime revenues from new orders won of Rs.14,673 million 6. Lifetime revenues from new order wins in 2W EV segment from 3 Customers (Incumbent & New) of Rs. 4,837 million India Automotive Production Number 6.00 6.00 38.4% 8.4% Q1 FY23 vs Q4 FY22 Q1 FY23 vs Q1 FY22 4.83 4.83 5.00 5.00 4.46 4.00 4.00 3.49 3.00 3.00 32.7% 2.00 2.00 (1.2%) 5.9% 1.06 87.8% 1.06 1.08 (5.7%) 1.00 0.80 1.00 (15.8%) 0.17 0.16 0.26 0.14 0.17 0.20 0.26 0.27 0.00 0.00 2 Wheeler 3 Wheeler Passenger Vehicle Commercial Vehicle 2 Wheeler 3 Wheeler Passenger Vehicle Commercial Vehicle Q1 FY23 Q1 FY22 Q1 FY23 Q4 FY22 • Low base of last year due to second wave of Covid has • General Cyclicity of the Industry from Q4 to Q1 was visible resulted into good growth across all segments during the Quarter • Supply issues related to semi-conductor results in • Despite cyclicity, growth in 2W is heartening and we expect muted growth for some 2W OEM’s in Q1 FY23. growth to pick up for 2W going ahead Source: SIAM Confidential Financials For Continued Operations Rs. In Million Q1 FY23 Q4 FY22 Q1 FY22 16352 16576 Revenue* 16,352 16,576 12,010 EBITDA 1,347 1009 698 12010 EBITDA Margin 8.2% 6.1% 5.8% 8.2% Operational PBT before JV 138.3 -158.8 -181.8 6.1% Forex Exchange (Loss)/Gain -96.8 119.2 1.3 5.8% Share of Profit/(loss) from JV -45.1 -21.2 -25.5 PBT -3.6 -60.9 -206.0 Q1 FY23 Q4 FY22 Q1 FY22 • Revenue from operations continues its strong momentum and grows by more than 36% on YoY basis • Improvement in EBITDA Margin on YoY basis is due to Operating Leverage • Improvement in EBITDA Margin on QoQ basis is due to increase in Gross Margin • Operational PBT before JV for the quarter is back to positive but reported PBT is impacted by MTM on forex balance and loss in JV * Please note that Revenue includes Govt Incentive of Rs.69 million in Q1 FY23; Rs.57 million in Q4 FY22 and Rs. 60 million in Q4 FY22 Revenue Breakdown for Q1 FY23 for Continued Operations Business Unit Segment Aftermarket, IMES, 4.6% Others, 4.6% 9.8% MBU, 12.4% 4 Wheeler, EBU, 17.9% Lighting, 32.2% 23.9% 2&3 Wheeler, 63.2% PBU, 31.4% Geography Customer Outside India, 19.7% Bajaj, 36.2% Other Customers, 63.8% India, 80.3% Confidential MBU=Metallic Business Unit; PBU=Polymer Business Unit; EBU=Electrical & Electronics Business Unit; Lighting = 2W & 4W Lighting7 Varroc Group Business Performance Rs. In Million Q1 FY23 Q4 FY22 Q1 FY22 India Operations Revenue* 12,721 12,493 9,540 EBITDA Margin^ 9.9% 9.7% 7.3% VLS Remaining Operations Revenue* 3,015 3,283 1,933 EBITDA Margin^ 1.7% -1.2% 5.2% Others Operations (IMES) Revenue* 746 904 741 EBITDA Margin^ 6.8% -10.5% -1.0% Conso. Continued Operation Revenue* 16,352 16,576 12,010 EBITDA Margin^ 8.2% 6.1% 5.8% Confidential * Please note that Revenue includes govt incentive ^Please note that EBITDA does not include MTM on forex Leverage and Cash Flow Net Debt Rs. In Billion Net Debt as on 30th June'22 30.1 11.8 9.9 5.3 27.0 26.5 26.4 Standalone plus Indian Overseas Continued VLS Discontinued Subsidiary Operations Operations Sep'21 Dec'21 Mar'22 Jun'22 Confidential New Lifetime Order Win in Q1 FY23 Annual Peak Revenue win of Rs.2,902 Million Lifetime Revenue win from ICE & EV Players Lifetime Revenue win of Rs.14,673 Million 9831 Annual EV, 33.0% Lifetime 4842 ICE, 67.0% 2121 781 FY 23 FY 24 Onwards Lifetime Revenue win from 2&3W and 4W Players Lifetime Revenue win from Customers 4 Wheelers, Bajaj, 31.6% 33.4% 2-3 Non-Bajaj, Wheelers, 68.4% 66.6% Confidential EV a Big-Opportunity (New Products in Various BU) R&D efforts are directed towards ongoing trends Increased Use Stricter Environmental Electrification Autonomous Driving Connectivity Digitalization & IoT Sustainability, Reliability & of Electronics Regulation Efficiency WE OFFER WIDE RANGE OF PRODUCTS FOR ELECTRIC VEHICLE WITH LOCALISED MANUFACTURING (2W/3W) 8 7 6 5 4 3 2 1 PMSM Telematics OnBoard BMS TFT/fully Digital Throttle Position Sensor DC-DC Motor TractionMotor Charger Cluster Converter Controller (Localized manufacturing for OBC & BMS) Traction Motor Shaft EV Fan EV Fan Housing PCB Cover Assy Single Speed Gear Adoption of EV is going to result in increase in content of certain products due to premiumization like clusters, switches and painted parts Have developed new products worth approx. Rs.37,900/- for 2 wheeler and Rs.46,000/- in 3 wheeler for EV EV Business won So Far: Highlights and Updates Industry product price Expected revenue in FY25 expectations based on Total @ Installed for current business based Component Investec Research (Rs per Capacity (Rs Crs) # on SOB and industry price 2W) * (Rs Crs) Traction motor 11,000 W Controller 5,000 2 DC-DC converter 1,400 866 700 Telematics 3,000 Battery Management 4,500 Other Products (VCU, On-board Charger, Switch and Polymer products etc) 13,000 Total per vehicle (A) 37,900 866 700 # constrained by the lowest capacity product; some of the product at Varroc will have much larger capacity; This is based oncertain volume assumptions for existing business wins *Research report published by Investec on 27th July 2021 titled "Electric Vehicles –the electrification of auto ancillaries" Industry product price Expected revenue in FY25 expectations based on Total @ Installed for current business based Component Investec Research (Rs per Capacity (Rs Crs) # on SOB and industry price 2W) * (Rs Crs) Traction motor 15,000 Controller 8,000 W DC-DC converter 1,500 3 368 306 Telematics 3,000 Battery Management 4,500 Other Products (VCU, On-board Charger, Switch and Polymer products etc) 14,000 Total per vehicle (B) 46,000 368 306 Total per vehicle (B) 46,000 1234 1006 Confidential Commercial Production of Traction Motors & Controller Rationale and Major Milestone Rationale Closure of the Divestment expected by Sept’22 Significant impact on the operating performance of the Varroc Lighting Systems business due to Covid-related disruptions from early 2020 Shareholders Approval (DONE) Semiconductor supply shortages have compounded the situation due to lower OEM demand, impacting capacity utilisation, margins and cash flows; full normalisationexpected to take another 12-18 months Lenders Approval Varroc has infused significant liquidity in VLS in the last year through QIP and (ONGOING) additional borrowings in India, resulting in high leverage, and constraining ability to invest in other growth opportunities Regulatory Approval (UK, EU, Proposed divestment will enable Varroc to deleverage its balance sheet Morocco Received, Only while enabling VLS to get required support as part of a large global auto- Mexico Pending) component player Confidential Financials for Discontinued Operations Rs. In Million Q1 FY23 Q4 FY22 Q1 FY22 Operational Revenue 19,453 19,730 17,466 Operational EBITDA -248 -391 -491 Operational EBITDA % -1.3% -2.0% -2.8% Depreciation* 0 1802 1500 Operational PBT -401 -2344 -2087 MTM Forex Gain (Loss) -378 -149 -126 PBT -779 -2493 -2214 TAX 24 31 84 PAT -803 -2,524 -2,129 Confidential *Please note that as per AS 105 we cannot depreciate the asset since the business is held for sale About Us Varroc is a Leading Indian Auto Technology Group with a Global Footprint Four primary business lines: • Founded in 1988 in Aurangabad, India by the Jain family • Successful listing on the Indian Stock Exchanges in July 2018 • Strong, long-lasting, growing customer relationships with marquee Global OEM’s • Well-diversified auto component business across products, segments, and customers • Low cost, strategically located global manufacturing footprint ELECTRICAL - LIGHTING ELECTRONICS • 35 Operating Manufacturing facilities and 7 R&D Centers • In-house R&D capabilities in India, Italy, Romania and China • ~750 R&D engineers; 76 patents filled for Indian Operations METALLIC • Experienced management team supported by reputedBoard POLYMER (Forging andValves) PARTNERSHIPS 3 Confidential Our Journey Varroc’s Transformation into a GlobalAuto Technology Group PolymerBusiness Acquired Forging Acquired Visteon’s global PV Signed an MoU with CanderaGmbH company, IMES, Italy lighting business (nowVLS) Varroc EngineeringLimited to integrate HMI (Human Machine 1990 listed on the Indian Stock Interface) 2007 2012 Acquired 90% stake in auto accessories exchanges (BSE &NSE). technology in TFT InstrumentClusters manufacturer Team Concepts (India) for Automotiveapplications 2018 2021 2017 IPO START Acquired Sa-ba Automotive PVLighting business inTurkey Signed SPA with Plastic Omnium to divest 4W Lighting JV with Dell’Orto for Electronic Fuel- Operations in EU & America Injection Technology for 2W inIndia. 2022 Technical Collaboration with Heraeus, PE Investments by Omega Germany for 2W catalytic converters Acquired 74% stake in Collaboration with TCHoldings and TataCapital in India CarIQ, a leading Umicore for 2W and3W Acquired 50% in VarrocTYC Telematics solution catalytic converters in Acquired Tri.o.m(Italy), Established JV in Romania with ELBA for Corporation(China) provider India For 2W lighting manufacturing of Electronic Components 2014 2019 2005 2011 2017 18 Confidential -Varroc Symmetric Representation of Varroc (Post Divestment) Promoter Share Holding Public Share Holding 75.0% Varroc Engineering Limited 25.0% VEL - Standalone Operations Overseas Joint Ventures Overseas Subsidiaries India Subsidiaries’ & JV ● Varroc TYC (China JV for ● IMES ITALY ● Electrical and Electronics (EBU) (incl. 2W Lighting) ● Varroc Polymers Pvt. Ltd (100%) (PBU) ● Metallic Business Unit (MBU) – Forging & Valves 4W Lighting) (50%) ● ITALY 2W Lighting ● CarIQ Technologies Pvt. Ltd (74%) (EBU) ● After Market Division (AMD) ● ROMANIA 2W Lighting ● Durovalves India Pvt. Ltd (72.78%) (MBU) ● India 4W Lighting Business VIETNAM 2W Lighting ● Varroc Dell Orto Pvt. Ltd. (50.0%) (EBU) ● ROMANIA Electronics ● FY2022 Revenue : ~R6900 mn FY2022 Revenue : ~Rs. 7,600 mn FY2022 Revenue : ~Rs. 33,000 mn FY2022 Revenue : ~Rs. 19,000 mn India Operations (EBU, PBU, Asia 4W Lighting Division Global 2W Lighting Electronics Business Others MBU and AMD) Confidential Diversified Business for Global Customers Lighting Business Varroc’s India Business Other AseanPV & Global /Indian 2W= Lighting Polymer Electrical & Electronics Metallic IMES • Offers complete solutions in • Supplies precision forged & machined • Manufactures hot • Global supplier of exterior lighting • Offers polymer solution providers electrical-electronics components, parts for engines and transmissions steel forged parts for Description to the 2W OEMs with a Pan-India systems for passenger carOEMs presence assemblies for automotive • Suppliesengines valves in domestic the construction and applications and international markets oil & gas industries Battery Body Upgrades Digital Mgmt. Matrix switches & to Speedo-Instrument System DC DC Transmission Crankshaft Connecting Rod Undercarriage Drill bit cones & Select LED Light CDI meter Cluster Offerings Converter Gears Links heads Guides \Air Filter Assemblies Mirror Assemblies Product Xenon LED with AFS Portfolio Painted Plastic Upgrades Electronic Regulator Traction Sun & Planetary Engine Valves Crankpins Undercarriage Trims Exterior to Fuel & Motor & Onboard Gears Segments Seat Assemblies (Interior & Door) Products Magneto Injection Rectifiers Controller Charger AseanPV lighting 4 Facilities India (2), Manufacturing China (2). 2W Lighting India (3) Global 13 Facilities –India# 6 Facilities –India# 4 Facilities –India# 2 Facilities –Italy Facilities# 2W Lighting 3 Facilities -Italy, Romania, Vietnam Revenue Mix* 21.4% 33.1% 19.8% 12.0% 5.1% FY22 Customer PV & 2W 2W, 3W, PV & CV 2W, 3W&CV 2W, 3W, PV, CV & OHV Earth-moving & Oil-drilling Segment A diversified product portfolio catering to 2W, 3W, PV, CV & OHV Segments BSVI Products EV Products Long-lasting, growing customer relationships with marquee auto OEMs globally and in India Please note: Aftermarket contributes nearly 8.5% of the Overall group revenue from continued operations * Revenue Mix does notinclude the revenue from the JV in China Confidential Board & Leadership Team Independent Directors Arjun Jain T. R. Srinivasan President – Electrical Group Chief Financial Officer Marc Szulewicz Business Unit and Ex-General Manager, Whole-time Director • TotalExperience: ~32 years Foreign equipment division, • TotalExperience: ~9 years • Previously associated with Plastic Omnium Hindustan Lever Ltd, and • Previously associated with Phillips India Bain& Co India Pvt. Ltd. VinishKathuria Tarang Jain Co-Founder and President Rohit Prakash of Rank Software Inc. Chairman and Sanjay Sharma President – Business Unit Managing Director Chief Supply Chain Officer Head (Metallic) and Whole-time Director • TotalExperience:~26years • Founded Varroc in 1988 • TotalExperience: ~25 years • Previouslyworked with Delphi Gautam Khandelwal Automotive Systems and • Over 30 years experience in the • Previously worked with Executive Chairman, Havells India automotive industry Sogefi EngineSystems India Nagpur Power and Industries Ltd Sethumadavan D. Christian Päschel Kavita Kulkarni President –Polymer President and CEO – VLS Business ChiefHumanResource Officer VijayaSampath Lawyer, ex-Group General • TotalExperience:~20years • TotalExperience: ~24 years • TotalExperience: ~27 years Counsel • PreviouslyfromHELLAasa • Previously associated with • Previously associated with for Bharti Airtel Ltd memberoftheExecutiveBoard Stanley Black & Decker, Infosys Ltd, WNS and and the Head of Sales in the Schneider Electric, General Mphasis AutomotiveLightingDivision Electric Trends Varroc @ For us, innovation is the ability to see GREENER FOCUS ONEV change as an opportunity, not a threat. •Traction Motor andController •DC DCConverter •OnboardCharger Global mobility trends we consistently •Battery ManagementSystem work towards: FOCUS ONSUSTAINABLE MATERIALS FOR Greener AUTOCOMPONENTS •Coffee ChaffHeadlamp HousingCase Safer •Specialised BMC (BulkMolded Compound) Reflectors Smarter FOCUS ONIMPROVED EMISSIONS & ENERGY EFFICIENCY Connected •Catalytic Converters •SodiumValves •TitaniumValves •3i Technology in PolymerParts •LEDTechnology-Headlamps & TailLamps •Conversion of Sheet Metalto High StrengthPlastic •Net ShapeForging Confidential Trends Varroc @ For us, innovation is the ability to see change as an opportunity, not a threat. SAFER SMARTER &CONNECTED •ConnectedClusters •EFIECU •ADB (Adaptive DrivingBeam) •TBT (Turn By Turn)Indicator •Matrix Technology inLighting •Duel Injection TailgateCarriers •Laser BoostedHeadlamps •ISG •AdvancedConnected VehiclesPlatform •CarIQ for carowners •BikeIQ for bikeowners •FleetIQ for advancedfleet management •Predictiveanalytics •Usage Based InsurancePlatform Confidential Electrification and Efficiency Connectivity and Digitization 48V-epowertrain platform for LCD to TFT and Connected small vehicles • Android/Car-play OS • WiFi/BTLE • Consists of basic units (on board charger, inverter • Smartphone usage and DC/DC converter) with PMSM Motor. Total • Digital Key power output is 2-8KW) • NFC for safety and unlock • BLDC motor for actuation (0.2-2KW) • Battery Management System TFT and Sensor Interface • Integrated Starter Gen (ISG) • Heads up display 48V-epowertrain components • Enhanced user experience integration (System & Compactness) • Helmet connectivity 48V- Alternate motor technology Power Assist ISG • Camera interface (rare earth magnet free/less) • Radar interface 48V Fuel cell and hydrogen-based technology FOTA in Telematics 96V-epowertrain platform for small Prognostic based use cases, Bike vehicles sharing, Cyber Security • Consists of basic units (on board charger, inverter and DC/DC converter) with PMSM Motor. Total power 5G enabled telematics, Video output is 10-25KW) sending capability • BLDC motor (3 to 8KW) Customer Centric Manufacturing Company WHAT NEXT BD & KAM AGILITY PROXIMITY DIGITALIIZATION STRUCTURE (INNOVATION) Cost Leadership in Manufacturing 1 SOURCING 2 VALUE ADDITION & VALUE ENGINEERING 3 INDUSTRY 4.0 (Smart Factories) Cross Business Unit Collaboration 4W ORVM Traction Mirror Motors ORVM With Tailgate Camera Liner System Cross BU Collaboration Spoiler Console Lighting Door Trim Swing Type Illumination Electric Footstep Why Varroc? Varroc’s Vision Statement Q - HighReliability To bring leading-edge technologies to the mainstream markets • Reuse of provendesigns • APQP methodology, layered process Audits, Sustenance with high quality and cost competitive solutions by delivering Audits ensures high quality &reliability customized solutions with superior services with speed, agilityand C - CompetitivePricing creativity and fostering an environment that empowers employees • No dependence on JV partner, so no burden of Royaltycosts and encourages the pursuit of excellence. • Complete in-houseValidation • Lower sourcing cost due to Bulk purchase for VarrocGroup D - StrategicLocations • VarrocPlant presence in close vicinity of customer plants ensuring timely delivery(JIT) • Faster & Speedy delivery due tolocalization Strong DesignCapability • Achieved higher part standardization as high as 80% Complete In-house development viz. Hardware, Software &Mechanical • Use of simulation Tools to reduce Design iterations & timee.g. P-spice, Ansys, MS-Nastran, NX-Nastran, Flux, Maxwelletc. Art ofManufacturing • Hi tech SMD facility for electronics PCB manufacturing with a planned Capacity increase from 12 Mnto 33 MnPCBassemblies/year • High precision molding, Anti Fogging & Metallizing equipment's for lightingprograms 28 Confidential -Varroc Thank You Our Core Values Sincerity Humility Integrity Passion Self-Discipline To speak and actfrom To walk witheveryone To do what isright To go thedistance To make it al happen theheart against al odds