MANAGEMENT DISCUSSION & ANALYSIS REPORT 1) Business Scenario The Company has a very strong brsence in Power Electronics industry which has medium and multinational companies as competitors. The main customer remains Indian Railways which is upgrading its technology and replacing old equipments, this offers huge opportunities for increasing business with them. Our core strength remains in providing top class technology products with excellent after sales service through three manufacturing plants and service network PAN India. The industry size will gradually increase due to greater requirements from Indian Railways, Metro and Mono Rail projects being planned all over India. The Company sees opportunities in supplying other 8-10 new products to the Railways and has plans to develop proto types, get approvals and start commercial productions in next few month's time. 2) Opportunities & Threats The Company is always looking for new opportunities in new customers and products. We hope to tap the export markets in South Asian countries like Myanmar, Vietnam, Indonesia and Taiwan which are growing economies. During the year we have exported products to Taiwan. . We are hopeful to win tenders for new requirements of Loco Transformers very soon which should keep our plants occupied throughout 2016-17. Since we have competition from multinationals, there is always reasonable threat of losing some business to them. 3) Outlook The government has shown keen interest in the modernization of Railways and we are confident that our sector will get more business due to this thrust. Considering our long standing in industry, we are positive on the business growth. 4) Risks and Concerns While the business from Railways looks positive and growing, we are concerned on the budget allocation of funds and priorities which could affect the growth of the Company. There is also very competitive bidding for this business and this could affect the already thin margins. Political disturbances may affect the priorities of the Railways which in turn could affect the business of the Company. 5) Segment wise and Product wise Performance The details of segment wise performance is reported in the Balance Sheet as notes to accounts. Equipment division which manufactures ESP, Loco Transformers, Water Cooled Rectifiers, TCR yet contributes to substantial share in the total sale and is poised for growth. Traction division which manufactures Inverters, Converters and other Railway Products is growing too. Components division is in the business of Semi Conductors devices which are mainly used for captive consumption for manufacturing Rectifiers. This vertical is also growing. AMC is a very important vertical for the Company, since the margins are better although the volume is lower, we expect this segment to grow substantially. Trading division is in the business of imported Capacitors and Fuses and has shown good growth during the year and the margins are also improving. 6) Internal Control Systems and their adequacy The Company has strict internal controls to commensurate with the size and nature of its business. Periodic checks are made on the efficiency of these controls by Internal Audit team, the reports of which are shared with the top management who take active involvement in development of better controls. 7) Financial performance with respect to operational performance The Company's financial performance has improved during the financial year 2015-16 and the losses have reduced although the sale is same as per last year. All operational costs are careful analyzed and all recurring and non-recurring expenses, wasteful and unproductive expenses are avoided. Budgets are accurately made to forecast and monitor expenses and study the variance to understand the reason for deviation. Break even analysis are done division wise to have a foresight on the impact of increase or decrease of fixed costs. 8) Development in Human Recourses / Industrial Relations The Company values Human Recourses and lays high importance on retention and development of the same and looks at it as a long term investment. The Company holds regularly technical and commercial training seminars conducted by eminent faculty to develop skills of employees. The management respects the dignity of all levels of employees equally. The relationship with Labour Union is extremely cordial. Registered Office: Lake Road, Bhandup (W) Mumbai - 400078 For and on behalf of the Board of Directors For Hind Rectifiers Ltd. S. K. Nevatia Chairman and Managing Director Date : 27th May, 2016 Place : Mumbai |