About CLN Energy Limited

Business Overview

CLN Energy Limited, incorporated on October 1, 2019, focuses on manufacturing products that reduce carbon emissions and promote sustainability. The company specializes in customized Lithium-ion batteries, motors, and powertrain components for electric vehicles, including controllers, throttles, DC-DC converters, displays, and differentials. It offers B2B solutions for both mobility applications, such as electric two-wheelers, three-wheelers, and four-wheelers, as well as stationary applications like solar, energy storage systems (ESS), and telecommunications.

Products, including Lithium-ion battery packs, motors, and powertrain components, are sold under the “CLN ENERGY” brand. CLN Energy operates two manufacturing facilities in Noida, Uttar Pradesh, and Pune, Maharashtra. Combined manufacturing capabilities include:

• Two-wheeler batteries: 168 MWH cell grading, 358 MWH cell sorting, 130 MWH manufacturing, and 72 MWH battery testing per annum.
• Other batteries: 41 MWH cell grading, 110 MWH cell sorting, 115 MWH manufacturing, and 41 MWH battery testing per annum.
• Motors: 60,000 units annually (Noida facility).

The company delivers unique and customized solutions for applications utilizing lithium-ion battery packs. As on September 30, 2024, the Company had 155 permanent employees. The Bankers the the Company is ICICI Bank Limited.

Industry Analysis

LITHIUM-ION BATTERY (LIB) MANUFACTURING INDUSTRY IN INDIA
Energy storage technologies are predicted to play a major part in the decarbonization of the electricity and transport sectors, which accounted for 49% of India's total greenhouse gas emissions (CO2 equivalent) in 2016. Among the several energy storage technologies available, lithium-ion batteries are anticipated to dominate the market during the upcoming decade (2021 onwards). Peak electricity demand would rise to 334 gigawatts (GW) by fiscal year 2030, with a total electricity generating need of 2,229 Billing units (BU). Thus, decarbonization of the electricity and transport industries is crucial to combating climate change. India unveiled its ambitious national goals for 2030 at the COP 26 UN Climate Change Conference, which include increasing its non-fossil energy capacity to 500 GW by 2030, obtaining 50% of its electricity needs from renewable sources by 2030, limiting projected carbon emissions by one billion tonnes, and lowering its economy's carbon intensity of its economy by less than 45% by 2030. In India, the lithium-ion battery business is anticipated to experience exponential growth over the next five years (2022 onwards), and the recycling market of these batteries is estimated to be nearly 22-23 GWh in 2030. The lithium-ion battery industry in India is predicted to grow from 2.9 gigawatt hour (GWh) in 2018 to about 132 GWh by 2030 (at a CAGR of 35.5%).

Advanced chemistry cell (ACC) batteries are the foundation of future low-carbon transportation and energy systems. With assistance from government initiatives on the supply and demand sides, India's domestic ACC battery manufacturing business is growing significantly. Critical minerals supply chains, including lithium, cobalt, nickel, and spherical graphite refining for active materials, are critical to achieving local value addition in the fabrication of ACC battery electrodes. The discovery of the country's first lithium reserve in Jammu and Kashmir, as well as another significant reserve in Degana, Rajasthan, opens up a major prospect for local lithium production. According to the Geological Survey of India (GSI) and mining officials, the lithium deposits in these reserves are large enough to supply nearly 80% of India's overall demand.

The cumulative demand for energy storage in India of 903 GWh by 2030, which is divided across many technologies such as lithium-ion batteries, redox flow batteries, and solid-state batteries. The lithium-ion battery market in India is expected to grow at a CAGR of 50% from 20 GWh in 2022 to 220 GWh by 2030. The current focus of Indian enterprises is on battery cell manufacture. However, as more cell manufacturing units are commissioned in India, the upstream process will most likely be the next priority area. These industries include graphite anode and cathode active material manufacture, as well as electrolyte, separator, and current collector manufacturing. These batteries are used in mobile phones, laptop computers, and other similar devices, and their shape and size vary depending on the application.

India can minimise its dependency on imports and assist in increasing resilience in global supply chains by localising the mining and refining value chain of essential minerals. India has joined the US-led Mineral Security Partnership (MSP) to help strengthen crucial mineral supply chains. The collaboration intends to speed up the establishment of varied and sustainable essential mineral supply chains. In addition, government-to-government (G2G) discussions for cooperative exploration and mining are progressing with friendly nations. The Indian government established KABIL to secure a steady supply of crucial and strategic minerals through G2G negotiation and the acquisition of mining assets abroad.

Lithium-ion batteries are electrochemical energy storage systems in which lithium ions serve as a charge carrier between electrodes. The chemistry used for a certain application is determined by a number of parameters, including cost, energy density, cycle life, and the charging rate necessary for the application.

There is a limited supply of lithium, nickel, cobalt, and manganese precursors, which are all key raw elements needed in the synthesis of active cathode materials for lithium-ion batteries. By 2030, India's LIB cell manufacturing industry will require 193 thousand tonnes of cathode active material, 98 thousand tonnes of anode active material, 91 thousand tonnes of aluminium, 41 thousand tonnes of copper, and 8 thousand tonnes of LiPF6 electrolyte material to produce 100 GWh of batteries. With almost non-existent infrastructure throughout the supply chain and minimal deployment expertise, India must establish greater control over the lithium-ion battery supply chain. Energy storage systems are expected to play a major part in global decarbonization, resulting in an exponential growth in demand. India should make an effort to become a manufacturing powerhouse in addition to trying to satisfy home demand through domestic production. The availability of minerals at reasonable rates will be important to global competitiveness. India's foreign policy must adapt to changing trends and prioritise strategic initiatives in key regions. A concentrated effort on R&D, process optimisation, and recycling can help to lessen the requirement to import cell components from other nations. Academia must immediately begin developing courses and curricula to satisfy the expanding employment demands.

MANUFACTURING SECTOR IN INDIA INDUSTRY REPORT
Manufacturing is emerging as an integral pillar in the country’s economic growth, thanks to the performance of key sectors like automotive, engineering, chemicals, pharmaceuticals, and consumer durables. The Indian manufacturing industry generated 16-17% of India’s GDP pre-pandemic and is projected to be one of the fastest growing sectors.

The machine tool industry was literally the nuts and bolts of the manufacturing industry in India. Today, technology has stimulated innovation with digital transformation a key aspect in gaining an edge in this highly competitive market.

Technology has today encouraged creativity, with digital transformation being a critical element in gaining an advantage in this increasingly competitive industry. The Indian manufacturing sector is steadily moving toward more automated and process-driven manufacturing, which is projected to improve efficiency and enhance productivity. India has the capacity to export goods worth US$ 1 trillion by 2030 and is on the road to becoming a major global manufacturing hub.

With 17% of the nation’s GDP and over 27.3 million workers, the manufacturing sector plays a significant role in the Indian economy. Through the implementation of different programmes and policies, the Indian government hopes to have 25% of the economy’s output come from manufacturing by 2025.

India now has the physical and digital infrastructure to raise the share of the manufacturing sector in the economy and make a realistic bid to be an important player in global supply chains.
A globally competitive manufacturing sector is India's greatest potential to drive economic growth and job creation this decade. Due to factors like power growth, long-term employment prospects, and skill routes for millions of people, India has a significant potential to engage in international markets. Several factors contribute to their potential. First off, these value chains are well positioned to benefit from India's advantages in terms of raw materials, industrial expertise, and entrepreneurship.

Second, they can take advantage of four market opportunities: expanding exports, localising imports, internal demand, and contract manufacturing. With digital transformation being a crucial component in achieving an advantage in this fiercely competitive industry, technology has today sparked creativity. Manufacturing sector in India is gradually shifting to a more automated and process driven manufacturing which is expected to increase the efficiency and boost production of the manufacturing industry.
India is gradually progressing on the road to Industry 4.0 through the Government of India’s initiatives like the National Manufacturing Policy which aims to increase the share of manufacturing in GDP to 25 percent by 2025 and the PLI scheme for manufacturing which was launched in 2022 to develop the core manufacturing sector at par with global manufacturing standards.
India is planning to offer incentives of up to Rs. 18,000 crore (US$ 2.2 billion) to spur local manufacturing in six new sectors including chemicals, shipping containers, and inputs for vaccines. India's mobile phone manufacturing industry anticipates creating 150,000 to 250,000 direct and indirect jobs within the next 12-16 months, driven by government incentives, and increased global demand. Major players like Apple and its contract manufacturers, along with Dixon Technologies, are expanding their workforce to meet growing production needs.

Manufacturing exports have registered their highest ever annual exports of US$ 447.46 billion with 6.03% growth during FY23 surpassing the previous year (FY22) record exports of US$ 422 billion. By 2030, Indian middle class is expected to have the second-largest share in global consumption at 17%. India’s gross value added (GVA) at current prices was estimated at US$ 770.08 billion as per the quarterly estimates of the first quarter of FY24.

India's GDP surged by 8.4% in the October-December quarter, surpassing expectations. GDP growth was driven by robust performances in the manufacturing and construction sectors, with the manufacturing sector expanding by 11.6% annually and the construction sector growing by 9.5%.

India has potential to become a global manufacturing hub and by 2030, it can add more than US$ 500 billion annually to the global economy. As per the economic survey reports, estimated employment in manufacturing sector in India was 5.7 crore in 2017-18, 6.12 crore in 2018-19 which was further increased to 6.24 crore in 2019-20. India's display panel market is estimated to grow from ~US$ 7 billion in 2021 to US$ 15 billion in 2025. The manufacturing GVA at current prices was estimated at US$ 110.48 billion in the first quarter of FY24.

Business Strengths

1. State-of-the-Art Manufacturing Facilities
CLN Energy operates two advanced manufacturing facilities in Noida (42,000 sq. ft) and Pune (21,000 sq. ft), equipped with in-house R&D labs, laser welding machines, automatic welding systems, and end-of-line testing. Recognized under the MOOWR Scheme as Custom Bonded Warehouses, these ISO-certified facilities produce lithium-ion battery packs and motors with a combined two-wheeler battery capacity of 168 MWH (cell grading), 358 MWH (cell sorting), 130 MWH (manufacturing), and 72 MWH (testing) annually. For other batteries, capacities include 41 MWH (grading), 110 MWH (sorting), 115 MWH (manufacturing), and 41 MWH (testing). The Noida facility has an annual capacity to produce 60,000 motors.

2. Experienced Leadership and Professional Team
The senior management team, led by CEO Sunil Gandhi and COO Manish Shah, each with over two decades of experience, oversees strategic planning and operations. A skilled team of professionals specializing in manufacturing, design, finance, HR, and IT positions the company for sustained growth and innovation.

3. Strong Customer Relationships
With a diversified customer base and revenue streams from manufacturing, trading, and services, CLN Energy ensures business continuity and risk mitigation. Customized solutions and timely deliveries foster long-term client relationships, driving organic growth through client satisfaction and referrals.

4. In-House Research and Development
An innovation-driven R&D team of 15 professionals in Noida focuses on product design, system engineering, and validation. Investments in R&D enable customized solutions, product performance improvements, and differentiation from competitors.

5. Customized Product Solutions
CLN Energy offers tailored lithium-ion batteries and motors for mobility and stationary applications. Customer requirements are processed through R&D, followed by prototype development, validation, and manufacturing upon design approval. Products are supported by after-sales services, including repairs and part replacements.

6. Consistent Financial Growth
Strong financial performance with total income rising from ₹12,170 lakhs in FY2022 to ₹13,285.94 lakhs in FY2024. Net worth increased from ₹285.62 lakhs in FY2022 to ₹1,337.34 lakhs in FY2024. PBT grew at a CAGR of 63.96%, and PAT margin improved to 7.38% in FY2024, highlighting robust profitability despite external challenges. Internal accruals have supported expansions, leveraging opportunities in the growing EV and ESS sectors.

Business Strategies

1. Capacity Enhancement Strategy
The manufacturing facilities in Noida (42,000 sq. ft.) and Pune (21,000 sq. ft.) have a combined annual capacity of 168 MWH for two-wheeler battery cell grading, 358 MWH for cell sorting, 130 MWH for manufacturing, and 72 MWH for battery testing. Additionally, other battery types account for 41 MWH in cell grading, 110 MWH in cell sorting, 115 MWH in manufacturing, and 41 MWH in battery testing. To increase production, new machinery will be installed in Noida, including enhancements in cell grading (143 MWH), cell sorting (54 MWH), manufacturing (50 MWH), and battery testing (150 MWH across all battery types).

2. Capital Augmentation for Working Capital
Enhanced liquidity and working capital are critical for expanding the product portfolio, improving credit terms, and addressing the rising demand for lithium-ion batteries in electric vehicles, stationary applications, and traction. Access to additional funds will enable greater operational efficiency, better capacity utilization, and the ability to seize emerging market opportunities.

3. Product Portfolio Expansion
Rising demand for lithium-ion batteries presents opportunities in mobility (two-wheeler, three-wheeler, four-wheeler EVs, e-tractors) and stationary applications (solar, ESS, telecom). Plans include diversifying offerings to include powertrain components such as motors, DC-DC converters, chargers, wiring harnesses, and telematics units, alongside batteries tailored for both domestic and export markets.

4. Investment in Advanced Technology and Eco-Friendly Solutions
Focused efforts on product innovation and development are supported by an in-house R&D team with expertise in hardware, firmware, system engineering, and simulation technologies. Investments in advanced test and simulation capabilities will enable faster product development and validation while ensuring the use of environmentally sustainable components

Business Risk Factors and Concerns

1. Revenue Dependency
A significant portion of revenue is derived from the sale of batteries, cells, and motor controllers. Any decline in demand or production of these products could adversely impact business operations and financial performance. Total revenues from the sale of goods were ₹6,022.02 lakhs (September 30, 2024), ₹10,966.72 lakhs (FY 2023-24), ₹11,151.41 lakhs (FY 2022-23), and ₹12,129.05 lakhs (FY 2021-22).

2. Dependence on Technology and R&D
The business heavily relies on proprietary technology, process know-how, and product development for lithium-ion batteries, motors, and powertrain components. The company’s ability to innovate and deliver cost-competitive solutions is critical to maintaining a competitive edge in dynamic markets like EVs, solar, telecom, and industrial applications. Technological disruptions or failure to innovate could significantly affect business sustainability.

3. Regional Revenue Concentration
A substantial portion of revenue comes from Delhi, Maharashtra, Uttar Pradesh, and Haryana, contributing 79.57% (September 30, 2024), 77.49% (FY 2023-24), 75.69% (FY 2022-23), and 79.93% (FY 2021-22). This dependency makes operations vulnerable to regional factors like political and economic instability, weather conditions, and unforeseen events.

4. Intense Market Competition
The energy sector, particularly lithium-ion batteries and powertrain components, is highly competitive. Increasing competition from domestic and international players, new market entrants, and consolidated competitors poses challenges. Established competitors may have superior resources and greater flexibility, making it difficult to maintain market position. Inadequate advertising, delayed responses to industry trends, or lack of competitiveness in pricing and solutions could negatively impact financial health and growth potential.

CLN Energy Company faces risks related to reliance on specific revenue streams, dependency on advanced technology, regional revenue concentration, and intense competition in the energy sector. These factors could affect operations, financial performance, and market position.