MANAGEMENT DISCUSSION & ANALYSIS REPORT 2014-15 OVERVIEW Global economy in 2014 struggled as developed countries managed their financial crisis and developing and emerging economies grew at a slower pace. World GDP is estimated to grow at 3% in 2015 and 3.3% in 2016, supported by a gradual revival in developed countries and low crude prices helping the oil-importing developing countries to deploy more resources in social sector development projects. Factors like commodity prices, world trade, interest rates & monetary policies will play significant roles in shaping the growth ahead. India is estimated to grow at 7.5% in 2015-16, according to the International Monetary Fund (IMF), becoming one of the fastest growing big emerging market economies in the world. India's economic growth will be augmented by easing monetary policy and pick-up in capital expenditure. INDUSTRIAL STRUCTURE AND DEVELOPMENT Drum Closure Your Company is the second largest manufacturer of steel Drum Closures and continues to enjoy a worldwide market share of about 36%. The Company produces a wide variety of closures and related equipment ranging from fully automatic flange insertion systems to cap-sealing tools. The Company caters to all leading steel drum manufacturing companies of the world. Each steel drum requires one set of closure, a brcision engineering product so as to ensure that the liquid inside does not spill out. The Company has designed and developed the next generation technology for manufacturing of drum closures. It also manufactures all its gaskets and clamps and offers a full range of drum closure products to its clients. With patented technology, there has been substantial reduction in manufacturing costs, improvement in quality and this has helped catapult TIIL to the second largest global manufacturer of steel drum closures. The Company has three global patent products for manufacturing of GRT Flanges, Octagonal Clinched and Drum Top. The Drum Closure segment of the Company is continuously maintaining its growth. Total revenue from the Drum Closure segment in the Financial Year 2014-15 was Rs. 26,933.25 Lacs as compared to Rs. 22,777.82 Lacs in the Financial Year 201314. Almost 97% of revenue was generated from Export Sales & incentives. Profit for the Financial Year 2014-15 was Rs. 7136.94 lacs as compared to Rs. 7,939.04 Lacs in the Financial Year 2013-14. Scaffoldings & Formwork Scaffolding is a temporary structure used to support people and material in the construction industries, real estate and any other large structures. It is usually a modular system of metal pipes or tubes, although it can be from other materials also. The Company is brsent in the brmium segment of Scaffolding business. Scaffolding segment is growing mainly on the back of the strong demand from the international infrastructure markets. TIIL's Scaffolding segment comprises of Scaffolding, Formwork and Tower business. Its major revenues accrue from overseas markets. Currently, North American market contributes 60% of total scaffolding revenues, South American market contributes 20%, and Australian market contributes 15%. TIIL is increasing its market share in South American market by expanding aggressively in the larger Latin American markets of Brazil, Argentina and Venezuela, etc. Formwork Business Formwork is the term given to either temporary or permanent molds into which concrete or similar materials are poured. Traditionally, formwork was built using easy to produce timber and plywood, or moisture-resistant particleboard. Over a period of time formwork is now made more of steels which are more durable and reusable. Looking at Indian government's focus on rapid infrastructural development across the country by constructing railways, roads, bridges, dams, airports, power plants and many more, construction is now growing at a fast pace. Contractors have started adapting newer technologies, faster systems, advanced concrete techniques and better and established management tools. Engineered Formwork Systems are built out of brfabricated modules with a metal frame - usually of steel or aluminum -and covered on the application (concrete) side with material having the wanted surface structure (steel, aluminum, plastic, timber, etc) TIIL has entered into manufacturing of sophisticated engineered Formwork systems for building, construction and infrastructure projects in India. TIIL has state-of-the-art manufacturing plant in India and is well placed to play a larger role in the construction growth in India and overseas, with a network of offices at Mumbai and overseas. The Revenue of Scaffolding segment improved significantly during the Financial Year 2014-15 as compared to Financial Year 2013-14. The revenue generated during the Financial Year 2014-15 was Rs. 31,874.78 Lacs as compared to Rs. 23,322.44 Lacs in Financial Year 2013-14 (growth of about 37%). The profit from this segment increased to Rs. 3306.55 Lacs in Financial Year 2014-15 as compared to Rs. 3196 Lacs in Financial Year, 2013-14. Yarn The Company produces variety of products ranging from NE 20 to NE 40, Carded and Combed varieties of Cotton Yarn. The Spinning mill is equipped with world-class Swiss, Japanese, German, Spanish equipment. Currently, TIIL exports 70% of products to Europe & Asia and remaining to Latin American countries. The Company manufactures brmium quality active wear products and provides superior service, making it one of the leading textile and apparel manufacturers in India. Products are custom knit, dyed, finished, cut, sewn, decorated, packaged and distributed. Being part of a diverse group, the Company has access to the latest trends in the European markets, thus enabling it to offer high quality products and latest fashions with Indian prices in a very short lead-time. During the Financial Year the revenue of Yarn Division was decreased slightly as compared to last Financial Year due to untamable market condition. Total revenue from the segment in the Financial Year 2014-15 was Rs.19,092.79 Lacs as compared to Rs. 22,446.53 Lacs in Financial Year 2013-14. Garments During the Current Financial Year the revenue from the Garment Division was increased to Rs. 3,186.30 lacs as compared to brvious years of Rs. 2,200.98 lacs. Power The Company has a coal based captive power generation plant of 15MW to cater to its power requirements, resulting into less dependence on state electricity board and surety of continuous power supply to all its divisions. During the year profit from Power division was increased significantly from loss of Rs. 434.66 Lacs in the Financial Year 201314 to profit of Rs. 513.36 lacs this year. Engineering services through Subsidiary Technosoft Engineering Projects Limited (TE), a subsidiary of the Company, provides engineering design services to various engineering / manufacturing companies. It offers multidisciplinary engineering services in 5 business lines viz. Engineering, Consulting, Innovation, Resources and Content. TE has a strong team of over 250 engineers and designers located worldwide. Its engineers and designers are equipped with state-of-the-art hardware and software tools, including tools for 3-D modeling, Finite Element Analysis and process simulation. TE operates in North America through its subsidiaries, Impact Engineering Solutions Inc. provides general engineering services and Swift Engineering Inc. provides EPCM services in the oil and gas industry. OPPORTUNITY & FUTURE PLAN Focus of the company is to consolidate and grow its position in each of its core businesses which is Drum Closures, Scaffolding, Engineering Services and Textiles. The Company sees the Drum Closure division growing at same or higher rate next year and it anticipate at least 10% growth and this is certainly one of its core focus areas. The Company is are working strongly and increasing the sales and profitability in China which is one of the main growing market for Drum Closures division. This year the China operations did quite well and there was strong revenue growth. China operations posted revenue of Rs.9,000 lacs and had a profit in excess of about Rs. 300 lacs. Drum Closure division is growing in China and next year the company expect Drum Closure division to do much better in China. Focus in Scaffolding division is to expand the portfolio to cover the commercial construction segment. The Company has seen slowdown in the oil and gas segment because of the substantial drop in crude oil prices which is why the fourth quarter performance of Scaffolding was not very good. The Company expects this brssure to continue for one or two more quarters and to mitigate that the Company has expanded into other markets like Western Europe, Central Europe, Middle East, Africa where it is catering to the commercial construction segment so that the Company is consolidating its position there.. RISK & THREAT Any rise in competitive landscape in domestic or international markets can lead to reduction in market share and can affect profitability. Any unforeseen slowdown in international geographies or political instability will affect future order position. Sharp rise in commodity prices, if it cannot be passed on to customers, will affect margins. High volatility in currency movement, if un-hedged in future, can affect profitability. Raw Material -The Volatility of price of Steel and Cotton has increased significantly in the last few years. Therefore, mitigating the impact of the price volatility is key objectives of the Company Market- The Company's business is Export Oriented Business and growth depend upon the demand in International Market specially USA, Europe and china. Financing: Technocrat's growth strategy is dependent on the internal cash generation level and ability to draw external capital for growth projects. Considering the industry volatility, Technocraft continued its journey of developing new markets and products and enhancing value added services to its customer. The Company aims to address risks, opportunity and threat posed by the business environment by developing appropriate risk mitigation measure. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has proper and adequate system of internal controls commensurate with its size and nature of operations to provide reasonable assurance that all assets are safeguarded, transactions are authorized, recorded and reported and applicable statures and corporate policies are duly complied with. The internal control system is supplemented through an independent extensive internal audit program and periodic review by management and audit committee. INDUSTRIAL RELATION During the year under review, there was an industrial unrest caused by incitement by outsiders in yarn divisions due to which production was hampered for about a month. The issue was resolved amicably and production resumed in regular manner immediately therafter. The Company continued to focus on development of leadership and people capability in the organization. CAUTIONARY STATEMENT Statements made in Management Discussion and Analysis Report describing the Company's objectives, estimates, expectations or brdictions are "Forward looking Statement" within the meaning of applicable laws and regulations. They are based on certain assumptions and expectations of future events. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operation include global and Indian demand- supply condition, raw material availability, trained manpower, changes in Government regulations, tax regimes, economic development within India and the countries within which the Company conducts business and other incidental factors. |