MANAGEMENT DISCUSSION ANALYSIS AND BUSINESS OUTLOOK A. INDUSTRY OVERVIEW: There has been significant change in Power Sector scenario in last one year. The generation grew 8.5% and peak deficit is down to 3.5% in 2014-15 as compared to 4.5% in 201314. The coal production and availability has also improved. This has resulted in availability of more power and need to evacuate the same. This has necessitated more green- field projects and hence more demand for insulators. There are plans to add about 135 GW of power generation capacity before 2017 to satisfy the projected demand. This additional generation capacity will require matching transmission network. State run Power Grid Corporation of India has recently approved six new investment plans worth Rs. 5,500 crores. The total investment of Rs 1,00,000 crores is envisaged by PGCIL for development of interstate transmission lines. There is also proposal for interconnection between India and Bangladesh which will be also handled by Power Grid. We are also observing enhanced spending by state utilities for intrastate transmission networks. Earlier there was lack of financial resources and financial crunch. However now resources are being planned as it has become need of hour. The capex of state utilities is likely to match with that of PGCIL. At state level our home state of Telangana is planning to invest Rs 45,000 crores in next 5 years out of which Rs 19,000 crores shall be in Transmission Sector. The North East states have been specially focused by GOI for development of Power Sector and an investment of Rs 30,000 crores has been earmarked in Transmission Sector. The Union Budget has been also supportive of Power Sector. It has proposed 5 new ultra mega power projects each of 4000 MW each. This will require matching T&D investment. There is also proposal to add 1.75 lakh MW in form of renewable energy. Your company is already supplier to Wind Mill companies and shall benefit from the same. There is huge target to add AC transmission lines by end of 12th Plan which shall be 31st March, 2017. 765 kV lines which are currently at 16,292 ckm are likely to be doubled to 32,250 ckm in next 2 years. Similarly HVDC lines which are currently at 9432 ckms are likely to become 16,872 ckms. Another opportunity is participation of private sector in Indian Power Sector. It is estimated that 45% of new transmission lines will be laid by Private Players. The model is based on viability gap funding and tariff based competitive bidding. This will open up additional demand for products of company. B. OPPORTUNITIES AND THREATS Opportunities 1) In addition to demand of green field projects there is demand for replacement insulators which your company's product will witness. 2) The Government policies of "Make in India" would give further impetus to domestic capability. 3) Necessary steps taken by Government to overcome fuel shortage / linkage issues, statutory approvals, Skill India will help. Threats 1) Cheap Imports continue to rise. In 201415 the growth in imports of insulators has been 15% as against export growth of mere 1.2% 2) Poor financial health of Discoms. 3) Delays in Project Execution faced by EPC contractors which delays off take of insulators. C. SEGMENT OR PRODUCT WISE PERFORMANCE: Keeping in view the industry overview as discussed in (A) above, the performance of the Company's product is reasonably good. During the year under review, in spite of intense competition, dollar fluctuations, increase in imports, reduction in margins due to inflationary trends and slow pace of implementation of EPC contracts, the Company was able to record a gross turnover of X 99.51 Crores as against X 87.39 Crores in the brvious year. During the year under review, the Company started Commercial production of 800kV insulators for transmission lines. D. OUTLOOK: The Electrical Equipment industry witnessed growth of 9.98% last year. The growth in last quarter of 2014-15 was 13%. The Generation capacity of about 30,000 MW is likely to be added in next 2 years. Also during 13th Plan (2017-22) there is total capacity addition of 93,400 MW proposed as follows, Thermal - 63,400 MW Hydro - 12,000 MW Nuclear - 18,000 MW Total - 93,400 MW This will require matching growth in transmission & distribution sector leading to increased demand for insulators. The insulators are also used for evacuation of Power from Wind Farms, Solar Plants etc. The Government has set up ambitious target of addition of 1, 00,000 MW for solar in next 5 years. There is going to be emphasis on alternative source of energy and this will have good demand of Insulators. E. RISKS AND CONCERNS: Intense competition from Chinese manufacturers, Dollar fluctuations and increase in costs of raw materials are the major risks and concerns that the Industry is facing now. The availability of funds with transmission utilities and Discoms continues to be short. The payment of supplies made are inordinately delayed sometime. This is adding to interest costs. Many foreign players are likely to open shops in India. This will have enhanced flow of goods in India market. The aggressive pricing strategy by Chinese manufacturers is making overseas market not so attractive. F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The internal audit and other internal checks implemented in the Company are adequate and commensurate with the size and nature of operations providing sufficient assurance and safe guarding all assets, authorizing all transactions and its recording and timely reporting. G. DISCUSSION OF FINANCIAL PERFORMANCE WITH RESPECT TO OPRATIONAL PERFORMANCE : During the year, the Company has achieved a gross turnover of X 99.51 Crores as against Rs 87.39 Crores during the brvious financial year. Considering the average industry growth, the financial/ operational performance of the Company was good. H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES /INDUSTRIAL RELATIONS FRONT: Industrial relations are harmonious. The company recognizes the importance and contribution of the human resources for its growth and development. As on 31st March, 2015 the Company has total strength of 192 employees. CAUTIONERY STATEMENT: The Statement in this section describes the Company's objectives projections, estimates, expectations and brdictions, which may be "forward looking statements" within the meaning of the applicable laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make difference to the Company's operations include economic conditions affecting demand/supply and price conditions in the domestic and overseas markets in which the Company operates changes in the Government regulations, tax laws and other incidental factors. |