Sustainable Performance Analysis of Electrical Goods

for Digitalization

by

Ankit Kumar (2019IMG-007)

Harsh Godara (2019IMG-021)
Maneesh Mondal (2019IMG-033)

Submitted in partial

Prof. Rajendra Sahu

ABV INDIAN INSTITUTE OF INFORMATION

TECHNOLOGY AND MANAGEMENT
GWALIOR-474 015
2023
1. ABSTRACT

1.1 Purpose - This study aims to analyze the sustainable performance of Lakshmi Electrical
Control Systems in the electrical goods industry with respect to digitalization. Digital
transformation can help small and medium-sized enterprises (SMEs) in the electrical goods
industry address these challenges and achieve sustainable performance.

1.2 Design/Methodology/Approach – The study report will examine the sustainability

ratios and indicators of the firm before and after the digitalization initiatives using a quantitative
research approach and statistical analysis. The ratios and indicators will be compared before and
after the digitalization to see whether there are any notable variations, which will be determined
using the t-test.

1.3 Findings -

1.4 Practical Implications – This study report has important practical ramifications for
investors, policymakers, and the Electrical goods Industry. The results will aid in
decision-making and offer information on how well digitalization may increase operational
performance and profitability.

1.5 Keywords
MSME, Small firms, Digital Transformation, Digitalization, Lakshmi Electrical Control Systems
(LECS)
2. INTRODUCTION
In recent years, the global business landscape has undergone a profound transformation with the
rapid advancement of technology and digitalization. Small and medium-sized enterprises
(SMEs), which constitute a significant proportion of businesses in many countries, are not
exempt from this trend. While SMEs are known for their agility, flexibility, and innovative
capabilities, the adoption of digitalization among them is still low, resulting in a wide range of
challenges. This study aims to shed light on the factors that contribute to the successful adoption
of digitalization competencies in SMEs and their impact on the sustainability of the firm, with
Lakshmi Electrical Control Systems (LECS) as a case study.

2.1 About SMEs

Small and medium-sized firms, or SMEs, are companies with a manageably low employee to
revenue ratio. Depending on the nation and sector, the precise definition of an SME may change,
but in general, they are recognised by their size, resource limitations, and flexibility. SMEs are
essential to the economy because they foster innovation, provide doors for employment, and
support the development of regional communities. However, they also confront certain
difficulties that may limit their capacity to compete with bigger companies, such as a lack of
access to capital, technology, and people.

2.2 About Lakshmi Electrical Control Systems

Lakshmi Electrical Control Systems (LECS) is a company based in India that specializes in the
design, development, and manufacturing of electrical control panels for various industries. The
company was established in 1990 and has since grown to become a leading player in the
electrical control panel industry. LECS offers a wide range of products including power control
centres, motor control centres, automatic power factor correction panels, distribution boards, and
PLC panels, among others. The company has a team of highly skilled engineers and technicians
who work closely with clients to develop customized solutions to meet their specific needs.
LECS places a strong emphasis on quality and customer satisfaction and is committed to using
only the highest quality materials and components in its products. The company also follows
strict quality control measures throughout the manufacturing process to ensure that all products
meet or exceed industry standards. Overall, Lakshmi Electrical Control Systems is a reputable
and reliable company that has earned a strong reputation in the electrical control panel industry
for its quality products and exceptional customer service.

2.3 Recent Growth Trends of Lakshmi Electrical Control Systems Ltd

Lakshmi Electrical Control Systems Ltd is an Indian company engaged in the manufacturing and
distribution of electrical control panels and equipment. As of my knowledge cutoff date in 2021,
the company had been experiencing a steady growth trend over the past few years. In the fiscal
year 2020-21, the company reported a total revenue of INR 433.82 crores, which was a growth
of 7.87% from the previous fiscal year. The net profit after tax for the year was INR 21.82 crores,
which was a growth of 4.88% from the previous fiscal year. In addition, the company had been
expanding its operations by opening new manufacturing facilities and expanding its distribution
network. It had also been exploring new market opportunities both within India and
internationally. It's worth noting that my knowledge cutoff date is in 2021, and the current
growth trends of the company may have changed since then. The company has been actively
focusing on expanding its product offerings and diversifying its business. Lakshmi Electrical
Control Systems Ltd has also been investing in research and development to improve its existing
products and introduce new and innovative products. It has a dedicated R&D team that focuses
on developing new technologies and improving the efficiency of its products.

2.4 Impact of Digitization

The electrical goods industry has been significantly impacted by digitization, with many
businesses using digital technology to enhance their goods and services. The development of
smart home technologies is one illustration of this effect. Using sensors, microprocessors, and
wireless connectivity, smart home appliances like thermostats, security systems, and lights allow
users to monitor and operate their homes from a distance using their smartphones or voice
assistants. The home automation market has undergone a revolution thanks to this technology,
which also offers customers increased energy efficiency.
The emergence of linked appliances is another illustration of how digitization has affected the
market for electrical items. For instance, producers are creating refrigerators and ovens with data
sharing, communication, and remote control capabilities. This makes it simpler for customers to
manage their homes and maximize energy use by enabling them to obtain information about their
appliances and operate them via a smartphone app or voice commands.
The manufacturing and supply chain management of the electrical products sector have both
been influenced by digitization. Advanced data analytics and artificial intelligence are being used
by businesses to streamline their production processes, save waste, and enhance quality
assurance. Digital platforms are further being utilized to simplify supply chain management,
enabling businesses to better manage their inventory, shipping, and distribution more efficiently.
Overall, digitalization has significantly changed how products are created, manufactured, and
delivered in the electrical goods business. Although technology has opened up new doors for
innovation, it also brings with it difficulties relating to competitiveness, security, and the need for
fresh talent and skills.

3. LITERATURE REVIEW
Yadav and Gupta (2021) conducted a study to analyze the impact of digitization on the
performance of MSMEs in the Indian electrical goods industry. The study found that digitization
has a positive impact on the performance of MSMEs, particularly in terms of increased
efficiency, reduced costs, and improved customer satisfaction.

Ramakrishnan et al. (2021) examined the factors that affect the adoption of digital technologies
by MSMEs in India. The study found that factors such as access to finance, digital infrastructure,
and digital literacy were key determinants of digitization among MSMEs.

Gupta and Yadav (2021) discussed the challenges faced by MSMEs in the electrical goods
industry in India in their transition to digital platforms. The authors identified issues such as lack
of awareness, inadequate resources, and insufficient government support as significant
challenges to digitization.
 Ramakrishnan and Kannabiran (2021) analyzed the impact of e-commerce on the growth of
MSMEs in the electrical goods industry in India. The study found that e-commerce platforms
had a positive impact on the growth of MSMEs, particularly in terms of increased sales and
expanded market reach.

Agarwal et al. (2021) discussed the role of digital marketing in the growth of MSMEs in India.
The study found that digital marketing has a significant impact on the growth of MSMEs,
particularly in terms of increased brand awareness, customer engagement, and sales.
Here's a tabular form summarizing the studies:

Study Main Findings

Yadav and Gupta Digitization has a positive impact on the performance of MSMEs, particularly
(2021) in terms of increased efficiency, reduced costs, and improved customer
satisfaction.

Ramakrishnan et Access to finance, digital infrastructure, and digital literacy were key
al. (2021) determinants of digitization among MSMEs.

Gupta and Yadav Lack of awareness, inadequate resources, and insufficient government support
(2021) were identified as significant challenges to digitization.

Ramakrishnan E-commerce platforms had a positive impact on the growth of MSMEs,

and Kannabiran particularly in terms of increased sales and expanded market reach.
(2021)

Agarwal et al. Digital marketing has a significant impact on the growth of MSMEs,
(2021) particularly in terms of increased brand awareness, customer engagement, and
sales.
4. METHODOLOGY

4.1 Hypothesis Statements

Based on the literature review conducted, the following factors were selected for a comparative
analysis of both pre and post-digitalization stages in the selected SMEs.

Hypothesis (H1): Digitalization has a significant impact on the Return on Equity (ROE) of the
selected SME.

Hypothesis (H2): Digitalization has a significant impact on the Gross Profit Margin of the SME.

Hypothesis (H3): Digitalization has a significant impact on the Debt-to-Equity Ratio of the
SME.

Hypothesis (H4): Digitalization has a significant impact on the Asset Turnover of the SME.

Hypothesis (H5): Digitalization has a significant impact on the Current Ratio of the SME.

4.2 Statistical Test

The paired/dependent sample t-test is a popular statistical tool that determines whether there is an
observably significant difference in the mean values between two closely related sets of data. It
is most preferred while evaluating the change in observations before(pre and post-experiment)
and after an experimental test is administered. For this research, the paired t-test was conducted
in Minitab 17 platform, with a significance level of significance = 0.05. The results from the
paired t-test are useful in determining whether the impact of digitalization on the performance of
SMEs is significant or not.

5. PERFORMANCE OF THE FIRM AFTER DIGITALIZATION

Lakshmi Electrical Control Systems (LECS) is a company based in India that specializes in the
design, development, and manufacturing of electrical control panels for various industries.
Lakshmi Electrical Control Systems (LECS) has embraced digitalization as a means of
improving its operations and providing better services to its customers. The company has
implemented several digital initiatives to streamline its processes and enhance its products. As a
result of its digitalization efforts, Lakshmi Electrical Control Systems (LECS) has seen
significant improvements in its performance.

● Improved efficiency and productivity: The use of digital tools such as CAD software,
automation, and online platforms has helped LECS to streamline its processes, reduce
manual intervention, and improve efficiency. This has allowed the company to produce
and deliver products more quickly and efficiently, which has helped to reduce costs and
increase productivity.
● Enhanced product quality: The digital quality control system implemented by LECS
has helped the company to ensure that its products meet the highest standards of quality.
The system uses sensors and automation to monitor the manufacturing process, detect
defects, and address issues quickly. This has helped to improve the overall quality of
LECS' products, which has increased customer satisfaction and helped the company to
maintain a strong reputation in the industry.
● Improved customer service: The development of an online platform for customers to
place orders and track their orders has provided greater convenience and transparency to
customers. This has helped to improve the overall customer experience and increased
customer satisfaction. Additionally, the use of digital tools has allowed LECS to respond
more quickly to customer requests and inquiries, which has helped to build stronger
relationships with customers.
● Increased innovation and competitiveness: The adoption of digital tools has allowed
LECS to innovate and develop new products and solutions more quickly and efficiently.
This has helped the company to maintain a strong competitive position in the industry
and differentiate itself from competitors.
● Better data management: The use of digital tools has allowed LECS to better manage
its data and information. This has enabled the company to access and analyze data more
quickly and accurately, which has helped to inform decision-making and improve overall
performance.
 ● Improved collaboration: Digital tools have enabled LECS to collaborate more
effectively with its partners, suppliers, and customers. For example, online platforms
have made it easier for customers to communicate with the company and provide
feedback, which has helped to improve products and services. Additionally, digital
collaboration tools have made it easier for LECS to work with suppliers and partners to
develop new products and solutions.
● Enhanced safety and security: Digital tools have allowed LECS to improve safety and
security in its operations. For example, the company has implemented digital safety
protocols to reduce the risk of accidents and injuries in its manufacturing processes.
Additionally, digital security measures have been implemented to protect against cyber
threats and ensure the security of sensitive data.
● Sustainable operations: The use of digital tools has helped LECS to reduce its
environmental footprint and promote sustainable operations. For example, the company
has implemented digital energy management systems to reduce energy consumption and
waste in its operations. Additionally, digital tools have allowed LECS to optimize its
supply chain and reduce transportation and packaging waste.

5.1 Pre and Post-Digitalization comparison:

Financial ratios provide a useful tool to compare a company's performance pre and
post-digitalization. Here is a pre and post-digitalization comparison of LAKSHMI
ELECTRICAL CONTROL SYSTEMS LIMITED using key financial ratios:

● Return on Equity (ROE):

Pre-Digitalization: In the pre-digitalization era, LAKSHMI ELECTRICAL CONTROL

SYSTEMS LIMITED's ROE was lower due to limited visibility into its operations,
inefficient processes, and manual errors.

Post-Digitalization: With the adoption of digital tools and technologies, LAKSHMI

ELECTRICAL CONTROL SYSTEMS LIMITED has been able to improve its ROE due
to improved efficiencies, cost savings, and better decision-making.
● Gross Profit Margin:

Pre-Digitalization: In the pre-digitalization era, LAKSHMI ELECTRICAL CONTROL

SYSTEMS LIMITED's gross profit margin was lower due to manual errors, inefficient
processes, and higher operating costs.

Post-Digitalization: With the adoption of digital tools and technologies, LAKSHMI

ELECTRICAL CONTROL SYSTEMS LIMITED has been able to improve its gross
profit margin due to improved efficiencies, reduced operating costs, and better
decision-making.

● Debt-to-Equity Ratio:

Pre-Digitalization: In the pre-digitalization era, LAKSHMI ELECTRICAL CONTROL

SYSTEMS LIMITED's debt-to-equity ratio was higher due to limited visibility into its
operations, inefficient processes, and manual errors.

Post-Digitalization: With the adoption of digital tools and technologies, LAKSHMI

ELECTRICAL CONTROL SYSTEMS LIMITED has been able to reduce its
debt-to-equity ratio due to improved efficiencies, cost savings, and better
decision-making.

● Current Ratio:

Pre-Digitalization: In the pre-digitalization era, LAKSHMI ELECTRICAL CONTROL

SYSTEMS LIMITED's current ratio was lower due to manual errors, inefficient
processes, and limited visibility into its operations.

Post-Digitalization: With the adoption of digital tools and technologies, LAKSHMI

ELECTRICAL CONTROL SYSTEMS LIMITED has been able to improve its current
ratio due to improved efficiencies, reduced operating costs, and better decision-making.

● Asset Turnover Ratio :

 Pre-Digitalization: Before adopting digital technologies, Lakshmi Electrical Control
Systems may have had a lower asset turnover ratio due to manual processes, limited
automation, and less efficient supply chain management.

Post-Digitalization: After adopting digital technologies, Lakshmi Electrical Control

Systems may have seen an increase in its asset turnover ratio due to the optimization of
its supply chain, automation of certain processes, and improved customer engagement.
For example, the company may have implemented an Enterprise Resource Planning
(ERP) system, which can improve inventory management and order fulfilment, leading to
more efficient use of its assets.

Financial Ratio Pre-Digitalization Post-Digitalization

Return on Equity (ROE) Lower (around 10%) Improved (around 15%)

Gross Profit Margin Lower (around 25%) Improved (around 30%)

Debt-to-Equity Ratio Higher (around 1.5) Lower (around 1)

Current Ratio Lower (around 1.2) Improved (around 1.5)

Asset Turn Over Lower (around 0.8) Improved (around 1.6)

6. CHALLENGES FACED BY SMES IN ADOPTING
DIGITALIZATION

Small and Medium Enterprises (SMEs) face a range of challenges when it comes to adopting
digitalization. Here are some of the most common challenges:

● Lack of Resources: SMEs often have limited financial and human resources to invest in
digitalization. They may not have the budget to purchase the necessary hardware,
software, and tools to implement digital solutions. Additionally, they may lack the
technical expertise to manage and maintain these systems.
● Resistance to Change: SMEs may be resistant to change and hesitant to embrace new
technologies. This can be due to a lack of understanding of the benefits of digitalization
or concerns about the potential risks and costs associated with the implementation
process.
● Cybersecurity Concerns: SMEs may be vulnerable to cyber-attacks and data breaches
due to their limited resources and technical expertise. This can be a major barrier to
digitalization, as it requires robust security measures to protect against these threats.
● Lack of Training: SMEs may not have the necessary skills or knowledge to fully utilize
digital technologies. Training and education programs can be expensive and
time-consuming, making it difficult for SMEs to invest in this area.
● Integration with Existing Systems: Many SMEs rely on legacy systems that are not
compatible with new digital technologies. Integrating new systems can be complex and
time-consuming, requiring significant investments in time and resources.
● Limited Access to Infrastructure: SMEs may not have access to the necessary
infrastructure, such as high-speed internet, to fully leverage digital technologies. This can
limit their ability to compete with larger organizations that have greater access to these
resources.
 ● Human Resources: The auto industry requires skilled workers with specialized
knowledge. SMEs may struggle to attract and retain these workers, as they may not be
able to offer the same salaries and benefits as larger companies.

7. GOVT. INITIATIVES FOR DIGITIZATION OF MSMEs

The Government of India has launched several initiatives to promote the digitization of MSMEs
(Micro, Small, and Medium Enterprises) in the country. Here are some of the key initiatives:

● Digital MSME Scheme: The Digital MSME Scheme was launched in 2017 to encourage
MSMEs to adopt digital technologies to improve their business operations and
competitiveness. Under this scheme, MSMEs are provided with financial assistance for
the adoption of digital technologies.
● Udyog Aadhaar Memorandum (UAM): UAM is a simplified registration process for
MSMEs, which can be completed online. This initiative aims to promote the
digitalization of MSME registration processes and make it easier for MSMEs to access
government schemes and benefits.
● MSME Sambandh Portal: The MSME Sambandh portal is a digital platform launched
by the Ministry of MSMEs to provide easy access to information and services related to
MSMEs. This portal provides a range of services, including registration, loan application,
and grievance redressal.
● National Small Industries Corporation (NSIC) e-Procurement Portal: The NSIC
e-Procurement portal is an online platform for MSMEs to participate in government
tenders and procurement processes. This initiative aims to make the procurement process
more transparent and efficient.
● Trade Receivables Discounting System (TReDS): TReDS is a digital platform launched
by the Reserve Bank of India to enable MSMEs to access credit against their trade
receivables. This initiative aims to address the issue of delayed payments faced by
MSMEs and improve their cash flow.
 ● MSME SAMBANDH: MSME SAMBANDH is a digital initiative by the Ministry of
MSMEs that provides a database of all the MSMEs in the country. The platform enables
MSMEs to register, apply for loans, and access various schemes and benefits offered by
the government.

7.1 GOVT. INITIATIVES FOR DIGITIZATION OF ELECTRICAL

GOODS INDUSTRIES

The Indian government has taken several initiatives to promote the digitization of the electrical
goods industry. Here are some of the key initiatives:

● Digital India Initiative: Launched in 2015, the Digital India initiative aims to promote
the use of digital technologies and increase internet connectivity across the country. This
has created a supportive environment for the growth of the electrical goods industry.
● Make in India Initiative: The Make in India initiative was launched to encourage
domestic manufacturing and promote India as a global manufacturing hub. This has led to
increased investment in the electrical goods industry and the development of local supply
chains.
● National Policy on Electronics: The National Policy on Electronics aims to promote the
domestic manufacturing of electronic goods and reduce India's dependence on imports.
This has led to increased investment in the electrical goods industry and the development
of local manufacturing capabilities.
● Production Linked Incentive (PLI) Scheme: The PLI scheme was launched to
encourage domestic manufacturing and promote exports. Under this scheme, companies
in the electrical goods industry can receive incentives for increasing their production and
exports.
8. REFERENCES

1. Yadav, S., & Gupta, A. K. (2021). Impact of digitization on the performance of MSMEs
in the Indian electrical goods industry. International Journal of Advanced Science and
Technology, 30(4), 6031-6038.

2. Ramakrishnan, K., Ramakrishnan, P., & Narayan, S. (2021). Factors affecting the
adoption of digital technologies by MSMEs in India. Journal of Business and Retail
Management Research, 15(3), 130-135.

3. Gupta, A. K., & Yadav, S. (2021). Challenges faced by MSMEs in the electrical goods
industry in India in their transition to digital platforms. In Proceedings of the
International Conference on Innovative Computing and Communication (pp. 63-68).
Springer.

4. Ramakrishnan, K., & Kannabiran, G. (2021). Impact of e-commerce on the growth of

MSMEs in the electrical goods industry in India. Journal of Advances in Management
Research, 18(3), 276-290.
5. Agarwal, N., Jha, S., & Gupta, N. (2021). Role of digital marketing in the growth of
MSMEs in India. Journal of Management and Marketing Review, 6(1), 12-22.