Varroc Engineering Limited — Investor Presentation 2021

Mar 4, 2021

Varroc Engineering Limited

Regd. & Corp. Office

L-4, MIDC, Industrial Area Waluj, Aurangabad 431 136 Maharashtra, India

Tel +91 240 6653600 Fax +91 240 2564540 email: varroc.info@varroc.com www.varrocgroup.com CIN: L28920MH1988PLC047335 varroc

•

VARROC/SE/INT/2020-21/71 March 4, 2021

To,

The Manager- Listing The Listing Department, ·National Stock Exchange of India Limited Exchange Plaza, Plot No. Cf 1, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai-400051.

NSE Symbol: VARROC

The Manager - Listing The Corporate Relation Department, Bombay Stock Exchange Limited Phiroze Jeejeebhoy Towers, Dalal Street, Fort, M umbai-400001.

BSE Security Code: 541578

Sub.: Intimation of schedule of meetings with institutional investors under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ('Listing Regulations')

Dear Sir/Madam,

Pursuant to Regulation 30 and other applicable regulations of the Listing Regulations, this is to inform you that the schedule of the institution.al investor meetings including over video conference /voice over calls, are as follows:

March 5, 2021 to	Meeting with certain institutional investors including over on
March 12, 2021 *	one to one basis Call Video Conference -

*subject to reschedule/ change as per requirement/ exigency.

Further, copy of the latest corporate presentation is enclosed which will be presented and discussed at the above-mentioned meetings. The same is also uploaded on the website of the Company i.e. .V\VW.varroc .com.

We request you to take this on record, and to treat the same as compliance with the applicable provisions of the Listing Regulations, as amended.

For Va roe Engineering Limited

Ajay Sharma Group General Counsel and Company Secretary Encl: a/a

Varroc Engineering Limited Corporate Presentation

March 2021

Disclaimer

The information contained in this presentation is provided by Varroc Engineering Limited (the "Company") to you solely for your information. This document is highly confidential and being given solely for your use and may not be retained by you and neither this presentation nor any part thereof may be (i) used or relied upon by any other party or for any other purpose; (ii) copied, photocopied, duplicated or otherwise reproduced in any form or by any means; or (iii) re-circulated, redistributed, passed on, published in any media, website or otherwise disseminated, to any other person, in any form or manner, in part or as a whole, without the prior written consent of the Company. Any unauthorized use, disclosure or public dissemination of information contained herein is prohibited. This presentation does not purport to be a complete description of the markets' conditions or developments referred to in the material.

This presentation is for private circulation only and does not constitute and should not be construed as an offer or invitation or inducement to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment there-of. This presentation is for general information purposes only, without regard to any specific objectives, financial situations or informational needs of any particular person.

Further, this presentation is not a prospectus, a statement in lieu of a prospectus, an offering circular, an advertisement or an offer document under the Companies Act, 2013, as amended, or the rules made thereunder, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended, or any other applicable law in India.

No representation, warranty, guarantee or undertaking, express or implied, is or will be made or any assurance given as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of any information, estimates, projections or opinions contained herein. Potential investors must make their own assessment of the relevance, accuracy and adequacy of the information contained in this presentation and must make such independent investigation as they may consider necessary or appropriate for such purpose. The statements contained in this presentation speak only as at the date as of which they are made, and the Company expressly disclaims any obligation or undertaking to supplement, amend or disseminate any updates or revisions to any statements contained herein to reflect any change in events, conditions or circumstances on which any such statements are based. Neither the Company nor any of its respective affiliates, its board of directors, its management, advisers or representatives, including any lead managers and their affiliates, or any other persons that may participate in any offering of securities of the Company, shall have any responsibility or liability whatsoever (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in connection with this presentation.

If there is any subsequent offering of any security of the Company, it will be made pursuant to separate and distinct offering documentation, and in such case the information in this presentation will be superseded in its entirety by any such offering documentation in final form.

In addition, as this presentation only contains general, summary and selected information about the Company, it may omit material information about the Company and is not a complete description of the Company's business and the risks relating to it. Therefore, this presentation should not form the basis of any investment decision to purchase or sell the Company's securities Any decision to purchase securities in the context of an offering of securities (if any) should be made solely on the basis of information contained in the offering documentation published in relation to such offering.

Attendees are deemed to represent that they possess, either individually or through their advisers, sufficient investment expertise to understand the risks involved in dealing in any such securities.

No one has been authorised to give any information or to make any representations other than those contained in this presentation, and if given or made, such information or representations must not be relied upon as having been authorised by the Company or its affiliates.

The information in this presentation does not constitute financial advice (nor investment, tax, accounting or legal advice) and does not take into account an investor's individual investment objectives, including the merits and risks involved in an investment in the Company or its securities, or an investor's financial situation, tax position or particular needs. No recommendation is made as to how investors should exercise any investment decision.

The Company may alter, modify or otherwise change in any manner the contents of this presentation, without obligation to notify any person of such revision or changes. Certain statements made in this presentation may be "forward looking statements" for purposes of laws and regulations of India and other than India. These statements include descriptions regarding the intent, belief or current expectations of the Company or its directors and officers with respect to the results of operations and financial condition, general business plans and strategy, the industry in which the Company operates and the competitive and regulatory environment of the Company. These statements can be recognized by the use of words such as "expects," "plans," "will," "estimates," "projects," or other words of similar meaning. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in such forward-looking statements as a result of various factors and assumptions, including future changes or developments in the Company's business, its competitive environment, information technology and political, economic, legal, regulatory and social conditions in India, which the Company believes to be reasonable in light of its operating experience in recent years. The Company does not undertake to revise any forward-looking statement that may be made from time to time by or on behalf of the Company.

This presentation is not an offer to sell or a solicitation of any offer to buy the securities of the Company in the United States or in any other jurisdiction where such offer or sale would be unlawful. Securities may not be offered, sold, resold, pledged, delivered, distributed or transferred, directly or indirectly, in to or within the United States absent registration under the United States Securities Act of 1933, as amended (the "Securities Act"), except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Company's securities have not been and will not be registered under the Securities Act.

Neither this document nor any part or copy of it may be distributed, directly or indirectly, in the United States. The distribution of this document in certain jurisdictions may be restricted by law and persons into whose possession this presentation comes should inform themselves about and observe any such restrictions. By reviewing this presentation, you agree to be bound by the foregoing limitations. You further represent and agree that you are located outside the United States and you are permitted under the laws of your jurisdiction to receive this presentation.

2

Varroc is a Leading Indian Auto Component Group with a Global Footprint

• Founded in 1988 in Aurangabad, India by the Jain family
• Successful listing on the Indian Stock Exchanges in July 2018

Two primary business lines:

1. Varroc Lighting Systems ("VLS"): global supplier of exterior lighting systems to passenger car OEMs

• 2. Varroc India Business: manufacturer and supplier of a diverse range of Polymer, Electrical and Metallic components to 2W, 3W and 4W OEMs.
• Strong, long-lasting, growing customer relationships with marquee auto OEMs globally and in India
• Well-diversified global auto component business across geographies, products and customers
• Low cost, strategically located, global manufacturing footprint
• 44 Manufacturing Facilities and 15 R&D Centres across 5 continents (4)
• In-house R&D capabilities in India, Czech Republic, China(3), USA, Mexico, Germany, Italy, Romania and Poland
• ~1,106 R&D engineers(4); 161 patents granted globally; 182 patents applied(4)
• Experienced management team supported by reputed Board
• ~13,420 employees across the globe(4)

Leading

Tier-1 manufacturer and supplier to the Indian 2W and 3W OEMs(5)

6 th

Largest(1), fastest growing among top global exterior auto lighting suppliers

2 nd

largest Indian auto component company(5)

INR 120bn FY19 revenue(2)

INR 111bn FY20 revenue(2)

INR 77bn 9MFY21 revenue(2)

Geared up to Drive Profitable Growth in the Medium Term

	01	Global, low cost, strategically located manufacturing footprint in place to capture growth opportunities
	02	Significant capacity added in the last 3 years to support rapid revenue growth
	03	Product portfolio enhanced to capture the emerging trends in EV transition, change in emission norms and integration of lighting with electronics
	04	Strong In-house Technology, Innovation & R&D Capabilities created in India and VLS to support growth plans
	05	Continuous drive to improve wallet share with customers to further diversify customer base and drive growth
	06	Short term focus in VLS to improve margins through improving operational efficiencies and better capacity utilization

Low Cost, Strategically Located Global Manufacturing Footprint 1

44(1) Manufacturing Facilities and 15(1) R&D Centers Across Asia, Europe, Africa, North and South America

Manufacturing and R&D capabilities spread across low cost countries

Proximity to OEMs leading to cost effectiveness and quicker turn-around times One of the few players to have pan-India presence servicing multiple OEMs

Significant Capacity Added in the Last 3 years to Support Rapid Revenue Growth 2

Varroc underwent significant capex cycle over the past 2 years…

….which coincided with a sharp slowdown in global auto industry¹…

As the capex cycle is completed, the

• Varroc's high capex over FY18-20 was primarily a result of VLS setting up 3 new plants, on the back of global order wins

• Global PV industry expected to grow at 15% in 2022

Details of Key Capex Programs

	MOROCCO	POLAND
Commencement of Operations	Q4 FY19	Q2 FY20
Revenue	Revenue run rate of €4.97 mn per month in Q3 FY20	Revenue run rate of €4.87 mn per month in Q3 FY20
Capex Incurred till Dec-2020	€46.7 mn	€13.9 mn
Balance Capex	Balance capex is related to orders realized/ to be realized	Balance capex is related to orders realized/ to be realized

• Set up new manufacturing plants in Morocco, Poland, India, Brazil and new line in Czech Republic
• Covid-19 related disruption and supply chain bottlenecks have delayed ramp-up at these new facilities

Capturing the Ongoing Trends – EV Transition and Changes in Emission Norms 3

• Recently entered high growth 2W EV market: 72-74% CAGR over FY21E-FY26P(1)
• Varroc has developed 48V PMSM traction motor; won order from one of the leading 2W OEMs in India
• Varroc made acquisition of CarIQ and entered into exclusive manufacturing tieups to capture the opportunities

Policy support(1):

• FAME II amendments & PMP Scheme – subsidy only for local production and higher warranty
• PLI (Production Linked Incentive) scheme for eligible players
• 15% import duty on traction motors from Apr-2021 to

Capturing the Ongoing Trends – EV Transition in India 3

EV adoption to witness a steady rise

Rising EV penetration in

EV Penetration %

Growing Demand for electric 2W and 3W (increasing penetration)

Case II

Production Linked Incentive Scheme for automobile industry

0.2 0.3

FY22P

FY21E

1.2

FY24P

FY26P Case I FY26P Case II

0.3 0.7

FY22P

FY21E

~0.10 2.0-2.1

FY24P

FY26P Case I FY26P Case II

3.0

Varroc has recently entered high growth 2W/3W EV component market

For the mentioned EV components, market size is expected to be ~INR 25.5 bn by FY26P under base scenario and ~INR 39.7 bn in an optimistic scenario¹

On-board chargers1)

Capturing the Ongoing Trends – Increasing LED Penetration in PV Lighting Globally 3

Exterior lighting market for passenger vehicles is expected to grow at a CAGR of 6.5% globally between 2020 and 2026 in terms of revenue, outpacing the CAGR of 5.8% in the overall market for passenger vehicles for the same period(1)

Rear Lamps – LED penetration rate(1) Other Lamps – LED penetration rate Head Lamps – LED penetration rate(1) (1)

• Exterior lighting market is expected to outgrow the growth of PV industry
• Headlamp market is the fastest growing market, compared to other lamps types, with a CAGR of 7.1% between 2020 and 2026(1)
• LEDs are rapidly gaining popularity as their cost decreases and efficiency, luminance, and package size improves
• VLS brings to the market new technologies such as Surface LED, 3D lighting, Adaptive Front Lighting Systems, Matrix LED and Laser, which are high growth products(1)

Strong In-house Technology, Innovation & R&D Capabilities 4

R&D efforts are directed towards ongoing trends

R&D Spend as % of Revenue (incl. China JV share) Most Engineers Located in Low-cost Geographies

India R&D focus has been on offering enhanced product portfolio VLS R&D focus is on providing cost effective solutions to OEMS

• Proprietary products with continuous focus on innovative, cost competitive designs.
• Seeks to capitalize on industry trends, including in particular moves towards emission reduction, autonomous driving, electrification, shared mobility and connectivity
• New technology tie ups for development of catalytic converter and electronic fuel injection systems
• GoI's DSIR approved R&D centers

• Focus on designing and developing products and technology solutions that are capable of being adopted by our customers across large product platforms
• Cutting edge technology providing safety and comfort like Matrix LED, by equipping high end segment and mass market segment
• Portfolio of lighting technologies including Halogen, Xenon/high-intensity discharge, LED, Matrix LED, high-definition MEMS and DMD, Surface LED and OLED module, Flex LED and LED pixel headlamp
• Significant investment in high definition light systems (Micro LED), new lighting systems to improve safety and communication

11

Strong In-house Technology, Innovation & R&D Capabilities: 4

Product portfolio representing technological capabilities

Product portfolio representing technological capabilities:

• Energy efficiency
• ̶ C02 emission and power consumption reduction
• Style and personalization
• ̶ Larger lit surface at front and at back side
• ̶ Seamless Light integration in bumper
• Comfort and Safety
• ̶ Maximum lighting with minimum impairment for others drivers
• ̶ Identification Of Vulnerable Road User
• Communication
• ̶ Emergence of AV
• ̶ Communication clearly vehicle intention

Varroc technology development focus on:

• Short term return on investment
• Affordable technology to mass market
• Mid term technology exploration with selected premium OEM and partners
• ̶ OLED
• ̶ Laser Diode and Other light sources
• ̶ Lit Logo
• ̶ Manufacturing technology

Continuous Drive to Diversify Customer Base 5

Customer share of invoiced amount by customer in India(1) Expanding customer base in India

Successfully diversified the customer base(1)

Key drivers for diversification of VLS customer base

• Stronger focus on winning businesses from large global OEMs (Example: Customer F increasing its share to invoiced revenue from 8.6% in FY18 to 22.1% in 9M FY21)
• Expanded geographical presence helping in winning global programs
• Re-wins encouraging and testimony to trust from strategic customers. (Example: Customer A continues to be strong albeit lower share of revenue vs FY18)

• Considered a preferred supplier for EV programs and LED lamps which are becoming mainstream

• New products (EV, BSVI products) and technology advantage helping us penetrate more customers.

• All major 2W OEMs in India are now customers to Varroc in a meaningful way. Our geographical footprints and diverse product offering helps us gain share with major OEMs with a lot ease
• Passenger Vehicle OEMs in India have become a sizable portion of our polymer business; our capabilities are that of a Full-Service Supplier (FSS)

13

VLS is the 6 th Largest; Gained Market Share over last 4 Years(1) 5

VLS is the 6th largest exterior lighting player globally; improved its global PV lighting market share by 130 bps between 2016 and 2020

Drivers for market share expansion

• Expanding global manufacturing footprint
• Gaining momentum with mass market global OEMs
• Providing cost effective, cutting edge technology to both premium and mass market PV OEMs

• Increase in realization per lamp as a result of adoption of LED technology

• Automotive exterior lighting market of US\$ 16.9 Bn in 2020; expected to grow at 6.5% CAGR (1) (2020-2026)

• Lighting is a fast growing product segment due to increasing lighting content per car(1)
• Concentrated market – top 6 players account for ~80% of over-all market(1)

Well Diversified Business Across Geographies, Product Groups, Customers and Segments

9MFY21 Consolidated Revenue(1): INR 76.8 bn

Consolidated Revenue Split by Customer(2) Revenue Split by Segment

• Diversified business in developed and emerging markets with strong India presence
• Comprehensive range of engine agnostic products
• Diversified customer base; no customer has >20% share
• Presence in fast growing India 2W and Global PV lighting segments

Global Business with Diversified Product Lines

	VLS		Other
	PV & Global 2W/ Small Lighting	Polymer	Electrical & Electronics	Metallic	IMES
Description	 Global supplier of exterior lighting systems for passenger car OEMs	 Offers polymer solution providers to the 2W OEMs with a Pan-India presence	 Offers complete solutions in electrical-electronics components, assemblies for automotive applications	 Supplies precision forged & machined parts for engines and transmissions  Supplies engines valves in domestic and international markets	 Manufactures hot steel forged parts for the construction and oil & gas industries
Select Product Portfolio	Head Lamps Rear Lamps Matrix Light LED Guides Xenon LED with AFS CHMSL Fog Lamps	\Air Filter Assemblies Mirror Assemblies Painted Plastic Trims Exterior Seat Assemblies (Interior & Door) Products	Battery Body Upgrades Digital Mgmt. switches & to Speedo Instrument System DC DC CDI meter Cluster Offerings Converter Upgrades Electronic Regulator Traction to Fuel & Motor & Onboard Magneto Injection Rectifiers Controller Charger	Transmission Crankshaft Connecting Rod Gears Sun & Planetary Engine Valves Crankpins Gears	Undercarriage Drill bit cones & Links heads Undercarriage Segments
Manufacturing Facilities#	Global PV lighting 16 Facilities Czech(2), China (2), India (2)*, Mexico, Morocco, Turkey, Poland, Brazil, Bulgaria, Romania Global 2W Lighting 3 Facilities - Italy, Romania, Vietnam	13 Facilities – India#	9 Facilities – India#	4 Facilities – India#	2 Facilities – Italy
Revenue Mix 9MFY21/ (FY18)	67.0% / (62.3%)	12.4% / (16.0%)	10.3% / (10.2%)	5.3% / (6.3%)	1.7% / (2.6%)
Customer Segment	PV & 2W	2W, 3W, PV & CV	2W, 3W & CV	2W, 3W, PV, CV & OHV	Earth-moving & Oil-drilling
A diversified product portfolio catering to 2W, 3W, PV, CV & OHV Segments BSVI Upcoming EV Long-lasting, growing customer relationships with marquee auto OEMs globally and in India Products Products

Diverse Product Portfolios with End-to-End Capabilities

Products including headlamps, rear lamps, fog lamps and center high mount stop lamps Headlamps Xenon LED with AFS Matrix Rear Lamps LED Light Guides Electronics Projector Headlamp Control Modules LED Module

Established presence in key emerging technologies such as LED, Laser, Matrix, OLED

Broad Portfolio of Lighting Technologies for PV OEMs Globally Comprehensive Solution Provider to 2 Wheeler OEMs in India

End to end capabilities across design, R&D/Engineering, testing/validation, tooling, manufacturing and delivery

18

Financial Summary : Key Performance Indicators

Revenue in FY20 and 9M FY21 declined due to industry slowdown and COVID-19 related disruptions; both India and globally

FY20 return ratios negatively impacted due to steep decline in margins as a result of COVID 19 related shutdowns and higher losses in newly operational plants Incurred high capex over FY18-20 on the back of global order wins funded by debt

Revenue Reported EBITDA and Reported EBITDA margin#

Fall in margins in 9M FY21 was mainly led by high absenteeism, coupled with higher OEM demand for Czech plants, resulting in high overtime and premium freight to be able to meet the delivery schedules and continued losses in new plants

ROCE & ROE* Net debt/EBITDA

Financial Summary : Consolidated Income Statement

(INR mn)	FY18	FY19	FY20	9M FY21
Revenue	103,785	120,365	111,219	76,835
% YoY Growth	8.0%	16.0%	-7.6%	-
Other Income	386	908	989	951
Total income	104,171	121,273	112,208	77,786
Raw Material Cost	63,827	75,759	69,862	50,472
Employee Benefit Expense	13,135	15,015	15,929	11,325
Excise duty	996	-	-	-
Depreciation and Amortization	3,865	5,656	7,319	6,586
Finance Cost	862	968	1,392	1,253
Other Expenses	17,051	19,003	17,220	12,246
Total Expenditure	99,735	116,402	111,721	81,883
Profit before exceptional and extraordinary items, tax and minority interest	4,435	4,871	487	-4,097
Share of Profit under Equity Method	690	315	-92	292
Profit Before Tax	5,126	5,185	395	-3,804
Net Tax Expense	618	898	370	-39
Profit After Tax	4,508	4,287	25	-3,765
Exceptional item - Tax Expense	-	-	-	1,078
Profit After Tax after Exceptional items	4,508	4,287	25	-4,843
EBITDA*	9,162	11,496	9,197	3,743
% EBITDA Margin	8.8%	9.6%	8.3%	4.9%

Financial Summary : Consolidated Balance Sheet

	Fiscal Year Ending March 31,
(INR mn)	2018	2019	2020	9M FY21
Non-Current Assets
Fixed Assets	31,480	45,593	52,448	54,030
Others - Non-Current Assets	6,439	8,355	16,164	16,544
Total Non - Current Assets	37,920	53,948	68,612	70,574
Current Assets
Current Investments	30	186	40	0
Cash and Bank Balances	3,289	1,634	10,688	3,988
Other -Current Assets	27,285	31,555	30,683	35,032
Total Current Assets	30,604	33,376	41,411	39,021
Total Assets	68,524	87,324	1,10,023	109,594
Equity and Liabilities
Shareholder's Funds
Share Capital	135	135	135	135
Reserves and Surplus	28,145	30,529	29,910	24,938
Equity attributable to owners	28,280	30,664	30,045	25,073
Minority Interest	208	241	249	271
Total Shareholder's Funds	28,488	30,906	30,295	25,344
Lease liability	-	-	6,522	6,516
Long Term Borrowings	6,361	4,572	9,002	6,936
Other Non-Current Liabilities	1,944	4,137	4,232	4,304
Total Non-Current Liabilities	8,306	8,709	19,756	17,756
Current Liabilities
Short Term Borrowings (including current maturities)	5,570	19,821	26,422	24,341
Finance Lease obligations	59	-	-	-
Lease Liabilities	-	-	604	853
Others Current Liabilities & provisions	26,102	27,888	32,946	41,301
Total Current Liabilities	31,730	47,709	59,972	66,494
Total Equity and Liabilities	68,524	87,324	1,10,023	109,594

Experienced Management Team Supported by Reputed Board

Tarang Jain*^

Chairman and Managing Director

• Co-founded Varroc in 1988
• Nearly 30 years experience in the automotive industry
• Experienced management team
• Independent directors with experience across industries & practices
• Strong governance: Big-4 statutory and internal auditors; independent board committees

Marc Szulewicz Independent Director

Ex-General Manager, Foreign equipment division, Plastic Omnium

Gautam Khandelwal Independent Director Executive Chairman, Nagpur Power and Industries Ltd

Vinish Kathuria

Independent Director Co-Founder and President of Rank Software Inc.

Vijaya Sampath Independent Director

Lawyer, ex-Group General Counsel for Bharti Airtel Ltd

Arjun Jain*^

Business Head – Electrical & Electronics Division and Whole-time Director

Previously associated with Bain & Co India Pvt. Ltd.

Stephane Vedie

• President and CEO – VLS
• Total Experience: 15 years in Automotive Lighting
• Previously associated with Magnetti Marelli

Rohit Prakash^

• President - Business Head -Metallic and
• Whole-time Director
• Previously worked with Sogefi Engine Systems India

T. R. Srinivasan Group Chief Financial Officer

• Total Experience: ~30 years
• Previously associated with Hindustan Lever Ltd, ATC Tires Private Ltd

Business Head - Polymer

Sethumadavan D.

Previously associated with Stanley Black & Decker, Schneider Electric, General Electric

Corporate Structure

@ Balance 50% is held by Mr. Roberto Tassi; # Balance 0.01% is held by Mr. Tarang Jain; & Balance 50 % is held by BESTE Motor Co. Ltd.; ^ Balance 0.02% is held by the administrators; + Balance 0.01% is held by Varroc European Holding BV; \$ Balance 1% is held by VLS, CZ; ## Balance 26% is held by existing promoters; \$\$Balance 27.22% is held by Scarpa & Freccia

Our Core Values