MANAGEMENT DISCUSSION AND ANALYSIS An unmatched vision of a man who started a small tube making unit in the year 1973 and through his compassion turned this small unit into one of the largest Indian Multinational's at all time. Shri Jai Prakash Agarwal, compassion runs into the blood of every person associated to Surya which transforms Surya into as a vast conglomerate with diverse business units in different states and today, indeed takes pride for being the largest Indian Lighting Company & largest G.I & Hollow section Pipes manufacturer. Surya provides "TOTAL LIGHTING SOLUTIONS" to the world community. Surya, not only climbed the value chain to offer world class products to our customers but also expanded its horizon in recent years. After embarking successfully into a fan segment by giving new dimensions to the fan market through its motto "HAWAA KA NAYA NAAM", company launched Electrical Home Appliances under its brand name 'SURYA' during the year and going by the response and numbers, we sure have been successful in delivering what we set out for. The Company's core business comprises of lighting and steel tube products. The world in which we do business is changing at a significant speed. To become global leader, Surya, adapts its technology, product development, manufacturing capabilities and marketing with the change needs and further committed to boost our energy sector create products that are not only energy efficient but also environment friendly. Company promote efficient energy through LED and thus move up to the next level of Energy Savings and rightly recognized as "Surya , the Art of LED Lighting". Inspired by Prime Minister's "Make in India" project, Surya start in- house production of indoor and outdoor LED product, LED Bulb, down lighter, Street Lights and thus developed LED (a green technology). SURYA competitively positioned today over its rivals and has become prominent brand in the consumer market due to the following factors - • Largest ERW Pipe and Cold Rolled Strips Mills at Bahadurgarh, Haryana • Largest G.I & Hollow Section Pipes Manufacturer. • High Mast and ERW pipe Manufacturing unit at Malanpur, MP. • Introduce Square & Section pipes in steel and thus increases its product basket and achieved higher market share. • Asia largest ribbon glass plant from Dema Glass UK at Gwalior, MP. • Surya is the only lighting company with 100 per cent backward integration. It manufactures all its components. Today Surya, is the art of LED Lighting • Surya is the second largest seller of GLS and FTL in India. • Surya Lamps saves upto 85% electricity & have more life. • State-of-the-art lighting laboratory in Noida that is one of the best lighting laboratories in Asia -Surya Technology & Innovation Centre (STIC). STIC has been recognized as an R & D centre by DSIR, Ministry of Science and Technology. Listed as one of the best testing laboratories in India by BEE (Bureau of Energy Efficiency) LED lighting system. • Surya, has an international brsence in more than 44 countries. • Surya, offered a vast range of product line - up including Tube Lights, GLS, CFL Lamps, wide range of LED's, HPSV / Metal Halide Lamps, Street Lighting , High Bay Lighting, flooding lighting, landscape lighting and High Mast etc and thereby participate in the growing infrastructure sector. • To complement its foray in luminaire segment, Surya Roshni has set up with state-of-the-art manufacturing facility for High Mast Lighting Systems and Octagonal Poles. • Surya provides wide categories of designer and colourful range of ceiling , table, pedestral & wall mounting fans along with wide range domestic exhaust fans. • Surya Launched feature rich , contemporary range of Electrical Home Appliances like Electrical Storage Water Heaters, Room Heaters, Dry Irons, Steam Irons and Immersion Heater in the first phase and plans to launch Kitchen appliances like Mixer Grinder, Induction Cookers, Toasters etc. in the next phase. Surya, is committed to provide its clients with value for money products, without compromising with the quality and thus quality has always been the driving force in every process from the raw material stage to the finished products Our commitment to deliver world-class brmium quality products to our clients in the shortest time lag enabled us to establish brsence across two corners of India and globally, leading to improved customer relationship. The success quotient of Surya is unmatched as company cater brilliance at every pedestal. Surya, achieved many accreditations and certificates from various governing bodies to guarantee the best of quality and next generation technology. The company's processes are certified under ISO 9001:2008 Quality Management Systems Standard, ISO 14001:2004 Environmental Management Systems Standards and OHSAS 1 8001:2007 Occupational Health and Safety Management System Standard. Surya has also obtained 5 star rating for fluorescent tube lamps from Bureau of Energy Efficiency, India. Surya GLS also conforms to brstigious European safety standards - "CE" & TUV Bauart. Surya, create a higher quality of life for every citizen of the world. It is company's endeavor to orchestrate the capabilities to realize a vibrant Surya Group in which every individual brings their potential into full play and contributes to the achievement of growth through creativity and innovation. We strive to stay on top of todays and tomorrow technology so that we create a better future and do justice to our vision and recreate new visions to prove a better visionaries of the world. At Surya, we utilized the tough times to strengthen our operations and thereby setting a grander stage for a promising future. Surya is poised to capitalize on the immense opportunities unfolding in the global market giving it an edge over its peers. INDUSTRY STRUCTURE, DEVELOPMENT & OUTLOOK Outlook for lighting industry Lighting is always a prime necessity in the modern world. It is an important component in the industrial growth of a country and vital at the domestic front for a good living. With the increase in residential houses, the demand for lighting and consequently the lighting industries are growing at tremendous pace. With a general improvement in the power condition both in urban and rural areas and anticipated increase in spending on infrastructure development both in public and private sectors in the coming years, the demand of regular lighting products is expected to increase by leaps and bounds. Surya Roshni brings brightness to many homes every evening in over 44 countries across the globe. Surya Roshni is one among the large producers in the field of light source and its components in India and has played the role of a technology leader by establishing new benchmarks for the industry. As a leader in the area of lighting equipments, Surya Roshni has been providing innovative and safe lighting equipments to its customers and became the first lighting company in India to introduce energy-efficient lighting solutions. Surya, ongoing commitment and dedication have pushed the boundaries of design and technology and relentlessly innovate and create products that are not only energy efficient but also environment friendly. Surya LED is the luminaire of the future and is transforming the nature of lighting, In view of the Government initiatives towards developing 100 Smart Cities and "Make in India" campaign shall help LED to grow faster and provide ample opportunities for Surya. Surya LED Bulb has long life (up to 25,000 hours), wide range of operating voltage (110v - 300v), free of mercury and substantial energy savings. LED Luminaire series consist of a wider basket of luminaries catering to different applications for indoor or outdoor illumination. Surya Roshni has an exhaustive range of luminaires and accessories to meet the requirement of every segment of professional lighting that includes domestic, industrial, designer, commercial, street lights besides LEDs. To complement its foray in luminaire segment, Surya Roshni has set up with state-of-the-art manufacturing facility for High Mast Lighting Systems and Octagonal Poles. Surya, wide range of world class energy efficient lamps, T5 lamps, Fluorescent lamps, high brssure sodium and mercury lamps, metal halides lamps to name a few are manufactured at state-of-the-art units with top of the line machinery and equipments (from FALMA-Montena S.A., Switzerland,DEMA engineering UK.GE-Hungary) to benchmarked processes and practices.Products are designed and developed after extensive in house research ensuring thereby high standards of quality. Surya Technology & Innovation Centre (STIC) at NOIDA is Jewel in the crown of Surya stable. It is one of the best lighting laboratories in Asia. It has house the Mirror Gonio- photometer from LMT-Germany and is used for developing new generation energy saving luminaries. In addition to this, Surya Roshni will provide Photometric Optical Testing facility for all kinds of luminaries. Apart for light source manufacturing, Surya Roshni has also been a leading manufacturer of various lamps' components since last two decades and well known as quality lamp component supplier from India. Outlook for Fan & Home Appliances Surya Roshni, embarking successfully into the fan market by selling 8,00,000 colourful range of Ceiling, Table, Pedestal, Wall mounted fans along with the wide range of domestic exhaust fans during the year. Encouraged by the success and demand introduced value added fans like Decorative Ceiling Fans, High speed Wall and Pedestal Fans, Tower and Cabin Fans placed Surya brand amongst the best in the Fan industry. During the year , Surya also added Home appliances business by introducing heating products like Water Heaters, Heat convectors Immersion rods in the month of October and subsequently adding Irons and Mixers . These products also have been accepted with great enthusiasm by the trade and company plans to do 40 crore business in this segment also in the current financial year. Surya Roshni has instituted a culture of continuous quality up-gradation and a strong system to ensure that the quality meets international benchmark. Outlook for steel pipes India has become the global pipe manufacturing hub primarily due to the benefits of its lower cost, high quality and geographical advantages. The global accreditations and certifications that the Indian companies possess have made them brferred suppliers for many leading infrastructure and Oil & Gas companies in the world and particularly those in Middle East, North America and Europe. The global economy returned to sustained growth, secondly with the new stable government policies on infrastructural projects provide enormous growth opportunities which will reflect in time to come. The domestic pipe industry is expected to accelerate as several upcoming pipeline projects expected in India and other countries along with the normal demand for replacement of existing pipe lines. The expanding infrastructure, oil & gas and construction sectors have been the main growth drivers for steel industry that includes steel pipes. Further, company has initiated steps to increase brsence in infrastructure segment and thus increased structural pipe sales. The company expects growth in the structural pipe segment with annual CAGR of more than 50% in coming 4 to 5 years' time. Apart from the global opportunity, the pipe industry has emerged with the scenario of huge demand due to startup of held up infrastructure project and policies of new stable government in the center. All-round demand in Agriculture, Housing, Urban as well as Rural development, infrastructure requirement, Oil & Gas line pipe and city gas distribution is envisaged which will give a boost to the pipe industry in the forthcoming period. Surya, the largest GI pipe Manufacturer in India understands in-depth the needs of its customers which guide it in adapting its technology to suit their new requirements and thus producing W- 104" Dia- pipes for Agriculture, Household and Oil & Gas sector. It produces API pipes for India and for Exports and recently introduced Section pipes in Steel Range to increase the product basket to achieve higher market share. Currently, the pipe division produces both galvanized and black varieties, in sizes ranging from V6" mm to 104" mm dia and in various specifications. The large diameter pipes of 100mm and above are made in grades like API 5L grades A & B as well as 5LX42, X46, X52, X56, X60, X65 and X70 (American Petroleum Institute). Our commitment to deliver world class products to our clients/customers in the shortest time lag enabled us to establish brsence all concerns of India and globally. The increased emphasis and thrust given by the Government on infrastructure and housing sectors and in particular improving water management and urban amenities, steel pipes have emerged as the most reliable, cost efficient and durable option which will again benefit the pipe industry. Mention must be made of the several initiatives taken by the Indian government to make available basic water supply and sanitation over large 3 parts of the country. Along with the focus on oil and gas sector, these initiatives serve as a big boost to the pipe industry as a whole. Strengths, Weakness, Opportunities and Threats Strengths With a nationally and Internationally accepted "SURYA" Brand and br eminent position in the Indian Steel pipes and lighting industry, SURYA is poised to capitalize on the immense opportunities unfolding in the global market giving it an edge over its peers. It has accredited quality certifications from leading agencies and has years of successful completion of contracts on schedule. Our commitment to deliver world- class solutions to our clients in the shortest time lag enabled us to establish brsence across two corners of India, leading to improved customer relationship. The Company's management has four decades of experience in the steel pipe industry and nearly three decades of experience in Lighting Industry. The Company has expanded the business both in size and range through various initiatives .These include increasing vertical integration, broadening nationwide marketing network, expanding the high-quality product range and complete backward integration in lighting industry. Surya, has strong and extensive dealer network & retailers from Kashmir to Kanyakumari and North East to Gujarat with more than 2,00,000 retailers sell Surya products in pan India. Weakness In the light source segment margins are low due to competition from established market players and many units from unorganized sector. Uncertainties of external market forces may also impact the business scenarios. Opportunities • Steel Tubes & Pipes Globally, Pipes are the most economical way to transport Oil & Gas. The increasing demand of energy, especially in a developing country like India, would accelerate the demand and thereby growth momentum in the steel pipe industry. Major Oil marketing companies are planning to lay pipelines across the length and breadth of the country that would generate a huge demand of pipes. The country's domestic Gas availability is expected to increase manifold in coming years and this would require huge infrastructure for domestic pipe lines. Government planning to develop 100 modern cities in the country will boost demand for small dia API pipe in the Country city gas distribution simultaneously the infrastructural & water/sewerage amenities will increase the demand manifold. The scope and opportunities in the world market is large. With the well established renowned SURYA brand, the wide range of both traditional and innovative products and an experienced export marketing, the company is confident of capturing new markets and enlarging the existing export market. This will provide larger visibility, higher volumes and increased margins in the near future. Now with the formation of new stable Government which is strongly committed to reforms agenda and taking effective economic action aimed at spurring consumption, building infrastructure and stimulating economic growth. Rural India is expected to thrive with good agricultural crop aided by appropriate government policy. Infra sectors provide a huge opportunity in both rural and urban India. The Construction sectors and housing sectors are booming thereby providing lighting and pipe industries a good opportunity to grow. • LED Surya, visualized the importance of LED lighting before and started its brparation accordingly. Surya's brsent LED share is about 35% of the total lighting turnover in the luminaire segment . Company has already introduced 100 LED product and is likely to introduce 100 more in the time to come. Surya, strive all potential opportunities to achieve revenue of Rs. 500 crore in the LED segment in the next three years. • Fan and Home Appliances 2014-2015 was the first complete year for fans sales and company achieved great success and sold 8,00,000 fans in the year. The acceptance of the brand Surya fans was good amongst Distributors, Retailers as well as customers. The Indian Fan Market size at brsent is approx. Rs. 5000 crores. Through its strong network of 2 lakh retailers Surya, plans to capture sizeable percentage of market share and be amongst the top three players in Fans by 2019-2020. During the year, Surya also added Home appliances business by introducing Heating products like Water Heaters, Heat convectors Immersion rods in the month of October and subsequently adding Irons and Mixers . These products also have been accepted with great enthusiasm by the trade and company has set a target of Rs. 200 crore sales in next 2 to 3 years. Threats Competition: Competition from spurious manufacturers, unorganized sector without quality constraints and multinational companies is always a challenge. Surya believes in confronting such challenges and transforming them into opportunities. We expect to meet these threats with better products, informed customer relationships, focused demand generation efforts and a strong business outlook. Cost of Raw material: Metal being a major raw material in steel tubes and pipe segment, any impact in its cost may affect our contribution margins. However the company has adopted various measures to minimize the adverse effect of volatile prices of raw materials. FINANCIAL & OPERATIONAL PERFORMANCE The Company was able to maintain itself as a leader in the Steel Tubes industry and as a strong contender in the Lighting industry. Given below are the financials of the company for the current as well as the brvious year Risk & Concerns Steel is the raw materials and a major cost component for the tube & pipe segment and its prices have a direct bearing on the profitability. Though in recent times steel prices have been down but it posing fresh challenges to the business world wide due to demand and supply factor. The quality parameters of pipes used in the oil & gas sectors are becoming more stringent each day. Moreover, any failure of pipes after the supply to customers in the oil & gas sectors attracts heavy penalties. Company is taking utmost care to source the best quality of raw materials to ensure very high quality end products. Orders from oil & gas sector depend however upon demand and success in bidding process. In the light source segment, technological obsolescence is an inherent business risk in a fast changing world. Speed of change and adaptability to the changing market is crucial for survival in business. Government energy policy and development of new innovative energy efficient products may render some of our existing production facilities obsolescent. Adaptability of new world class technology by adding a host of LED products and being cost effective is always the core strength of Surya to overcome the obsolescence. Risk Management Policy Risk Management Policy ("Policy") of Surya Roshni Limited is brpared and adopted to build a framework for risk management. Policy is aimed to develop an approach to make an assessment and management of the risks in financial, operational and project based areas in a timely manner. The main objectives of the Risk Management Policy are: • To ensure that all the current and future material risk exposures of the Company are identified, assessed, quantified, appropriately mitigated, minimized and managed. • To protect brand value through strategic control and operational policies; • To establish a framework for the Company's risk management process and to ensure company- wide implementation; • To ensure systematic and uniform assessment of risks related with different functions of the Company; • To enable compliance with appropriate regulations, wherever applicable, through the adoption of best practices. Board assess several types of risks which the company is exposed to from time to time which include the following: 1. Strategic Risks 2. Industry and Competition Risks 3. Risk of Cost Material Prices 4. Risk of Technical Obsolescence 5. Financial Risk Generally, company undertakes Derivative/ Treasury Transactions with Banks as permitted by the Reserve Bank of India within the framework of the approved Risk Management Policy of the Company with a view to mitigate the underlying risk exposure or to hedge the risk pertaining to the loans/facilities obtained from various banks or Exports or Imports carried out/to be carried out or any other forex / rupee exposures in connection with the business of the Company. The Board of the Company periodically review and evaluate the risk management system of the Company so that the management controls the risks through properly defined network. Head of Departments shall be responsible for implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Board and Audit Committee. No risks threatening the existence of the organization have been identified. However there are other risks against which adequate mitigation plans are brpared. Internal Control Systems SURYA has a proper and adequate system of internal control commensurate with the size and nature of business. The internal control system is an integral component of the company's corporate governance. The company has in place a strong and independent Internal Audit Department responsible for assessing and improving the effectiveness of internal control and governance. Internal Audit focuses on operational as well as systems audit. The Scope and authority of the Internal Audit function is defined in the Internal Audit Charter. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. Extensive programme of risk and transaction based internal audits cover all divisions, plants, branches and the different areas of operations. The Audit committee of the Board is updated every quarter on major internal audit observations, compliances with accounting standards, risk management and control systems. The Audit committee assesses the adequacy and effectiveness of inputs given by the internal audit and suggests improvement for strengthening the control systems. Further, Company has an extensive budgetary control system, which is regularly examined by the management. Surya has well defined Management Information System with clear Organizational Structures and authorization levels for business transactions. Surya, Internal finance controls are quite adequate and operate effectively and ensures orderly and efficient conduct of its business including adherence to its policies, safeguard its assets, brvent and detect frauds and errors, maintain accuracy and completeness of its accounting records and further enable it in timely brparation of reliable financial information. Material Developments in Human Resources/ Industrial Relations Surya is committed to create an open and transparent organization that is focused on people and their capability, and fostering an environment that enables them to deliver superior performance. Attracting quality human resources and focusing on their development, motivation and retention has always been a priority area for Surya. The Management wishes to place on record, the excellent cooperation and contribution made by the employees, collectively called " SURYA PARIVAR" at all levels of the organization to the continued growth of the company. The Company's industrial relations continued to be harmonious during the year under review. The number of personnel directly employed by the company was 3334 as on 31st March, 2015. Corporate Social Responsibility The CSR movement in Surya is based on the core belief of compliance of social and ecological responsibilities. Corporate social responsibility is basically a continuous process whereby the company contributes to a better society and a cleaner environment Surya Roshni Limited CSR Policy" describes and contains the Company's philosophy for delivering its responsibility as a corporate citizen and lays down the guidelines, process and mechanisms for undertaking socially useful programmes for welfare and sustainable development of the community at large. The key objective is to eradicating hunger, poverty and malnutrition; Promoting health care; making available safe drinking water & Sanitation; Promoting education ; enhancing vocational skills &livelihood enhancement projects; Women empowerment; Promoting of home and hostels for women and orphans; Reducing inequality faced by socially and economically backward groups; Animal welfare /animal care; Promoting Art & Culture; Contribution to Prime Minister Relief Fund; Rural development projects; and addressing environmental issues. To attain Company's Corporate Social Responsibility objective in a professional and integrated manner, the Company discharged its responsibilities through Surya Foundation. In pursuance of this objective, the foundation is working on the following areas: • Adarsh Gram Yojana • Development of Preventive and Cost Effective Health Systems of Naturopathy and Yoga • Ideal Village Projects with emphasis on Literacy and Personality Development of Youth During the year under review, Company spends Rs. 1.30 crores on corporate social activities being two percent of the average net profits of the company made during the three immediately brceding financial years. At the business level this is reflected through energy efficient products made to conserve the scarce energy resources level. Cautionary Statement This report contains forward-looking statements about the business, financial performance, skills and prospects of the Company. Statements about the plans, intentions, expectations, beliefs, estimates, brdictions or similar exbrssions for future are forward-looking statements. Forward-looking statements should be viewed in the context of many risk issues and events that could cause the actual performance to be different from that contemplated in the Directors' Report and Management Discussions and Analysis Report, including but not limited to, the impact of changes in oil, steel prices world wide, technological obsolescence and domestic, economic and political conditions. We can not assure that outcome of this forward looking statements will be realized. The Company disclaims any duty to update the information given in the aforesaid reports. |