Management Discussion and Analysis

a) Industry Overview

India has been witnessing a significant rise in power demand for the past few decades on account of rapid growth in population, industrialization and urbanization. The government has taken up various initiatives including Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) for electrification of rural pockets of India, which has spurred significant investments in the country's power sector. Notable technological upgrades are underway to reinforce the country's transmission and distribution network, which would continue to drive the demand for power and distribution transformers in India. Considering the negative impact of these technological developments on the environment, the industry has been undergoing a paradigm shift towards green technologies. As a result, industry is witnessing surge in demand of transformers from wind, solar & hydro projects.

b) Opportunities

According to market survey, the power and distribution transformers market in India is projected to grow at a CAGR of over 10% till 2020. Power transformers contribute a major portion in overall market revenues due to their higher price points. Under the 12th five year plan (2012-2017), the central government has allocated US$ 200 billion for strengthening the country's power generation, transmission and distribution sector. One of the major developments underway includes the country's shift from 765 kV to 1200 kV power transmission. This, in turn, is fueling the demand for EHV and UHV class power transformer installations throughout the country. India is also focusing on use of alternative energy resources like nuclear and solar energy for power generation, which is expected to further boost transformer deployments in the country in the coming years.

c) Threats

Foreign players, especially Chinese and Korean electrical equipment manufacturers, have captured almost one fourth of Indian transformers market, mainly in EHV and UHV class power transformers, as the products offered by them are considered cheaper and technologically advanced.Reliance on import for raw materials, specifically electrical steel, is a major handicap for Indian transformer manufacturers in achieving faster turnaround time as well as lower production costs.

d) Segment wise performance

Power transformer forms the largest chunk of transformer market by value and account for about 60-65% of the total transformer industry. Distribution transformers would account for the remaining 40-45% of the total value of the transformer industry.Your Company is engaged in manufacturing of Distribution Transformers ranging from 5 KVA to 3000 KVA and Power Transformers ranging from 3000 KVA to 25,000 KVA. The Company also manufactures solar and windmill transformers for renewable energy sector.

e) Outlook

The Indian power and distribution transformer markets are highly dependent on investments planned by the Government of India for the T&D segment and reform programs of the Central Government. These programs, when fully implemented as scheduled, are expected to drive the demand for both power and distribution transformers. With the continuous support from the government to promote the power transformer industry through investments, tax benefits, subsidies etc. will help the industry to grow over the coming years.Growing Indian economy, growth in electricity consumption, growing industrial demand, expanding export market, large scale generation capacity addition, setting up of national grid, rapid expansion of urban and rural distribution infrastructure will remain key drivers of the transformer market in India. In the brsent scenario, your Company has concentrated on updating its technical capabilities to develop transformers of latest technology and design and in turn strengthen its market share and improvise its profitability.

f) Internal control system

Internal controls and systems have found to be adequate. These are reviewed periodically by the Audit Committee and efforts are made to improve further, wherever possible.

g) Human resources and Safety

Your Company continued its activities during the year in a cordial atmosphere with utmost co-operation amongst employees and the management. The management is committed to promote safety, occupational health and proper environment is design, planning, training and completion of all tasks. Trainings are imparted to workmen in various new techniques and systems. During the period under review, your Company remains "Zero Discharging Pollution Unit".The Company believes in sustainable development and is committed to discharge its social responsibilities to the extent possible. The Company regularly donates to the institutions for noble cause. The Company has taken initiative by indemnifying small vendors and to lend them support for their individual growth.