MANAGEMENT DISCUSSION & ANALYSIS OPERATING HIGHLIGHTS OF FINANCIAL YEAR 2014-15 During the year, the Company has successfully commissioned the 1x600 MW Mettur thermal power plant. The plant has achieved commercial operation and has been handed over to the client TNEB for regular operations. Another major milestone for the Company was the successful achievement of commercial operation date for Unit 1 of the 2 x 660 MW Krishnapatnam Project, which was the first Super Critical BoP project undertaken by the Company. The Company has also achieved commercial operation date for Unit 1 of the 2 x 600 MW EPC Kalisindh Project and the Unit is currently under commercial operation by the client, RRVUNL. Unit 2 of 2 X 600 MW EPC of Kalisindh Project has been synchronised and coal firing completed. Project completion is scheduled during the current financial year. 2 X 500 MW BoP with BTG Civil works – Marwa Project: Unit 1 has achieved full load operation with coal firing and Unit 2 has been synchronised with oil firing. Project completion is expected during the current financial year. Work on 2 X 660 MW Boiler and its auxiliary – NTPC Solapur and Meja projects, 2 X 800 MW STG and its auxiliary – NTPC Lara Project and 2 X 660 MW OPGCL Project, Orissa are progressing at a brisk pace. Environmental Engineering Division (EED) has successfully manufactured and supplied the largest Deaerator in India to Nuclear Power Corporation of India Limited (NPCIL) for their 2x700 MW Kakrapar Plant. This is the largest ever Deaerator supplied by the Company. For the first time, the Deaerator and the Storage Tank were built and transported as single package. INDUSTRY OUTLOOK The year 2014 was a watershed in the Indian political landscape; ushering in a new government with a strong mandate at the Centre. With the gradual reduction in inflationary brssures and further softening in the interest rate by RBI in the next 6-12 months, the Indian economy is all set to witness growth in GDP in the coming years. IMF, World Bank and international rating agencies have projected the GDP of the Indian economy to clock 7.2% - 7.5% in FY16 and likely to grow further in the coming years. For a boost in GDP growth, for the ambitious ‘Make in India’ campaign to materialize and for our country to become a global manufacturing hub, the Indian economy would require more electricity. The government is committed to its dream to provide 24 X 7 power across the country in the years to come and this augers well for the power sector. The recently concluded coal block auctions is already being hailed as the biggest game changer for the power sector in 2015. Capacity addition in the power sector, by way of completion of the stalled projects and new power projects to be announced soon, is expected to happen at a frenetic pace in the years to come. The speed and commitment exhibited by the Government in taking policy decisions in areas like infrastructure, defence, housing etc. to boost the growth rate of the Indian economy is very positive for the economy and industry in general and the power sector in particular. India’s total power generation grew at an aggressive pace of 9% during the first eleven months of the financial year 2014-15. This growth was fuelled by imbrssive performance by thermal power segment, which clocked an 11.7% growth rate. As per CEA, total power generation target for 2015-16 is 1,136 billion units, a growth of approximately 8.2 per cent. Thermal power generation is expected to contribute about 85% of this output. Out of the targeted capacity addition of 88,537 MW during the 12th Plan, 61,014.12 MW (i.e. 69%) had been achieved till March ’15. SALES The BoP, EPC and Construction segment has achieved turnover of Rs. 3119 crores, at the same level of the turnover achieved last year, inspite of order slowdown in the power sector during the last 3 years. The capital goods segment achieved turnover of Rs. 246 crores registering a growth of 33% over last year. Despite challenging market conditions, Air Fin Cooler division delivered 24% higher Turnover at Rs. 172 crores compared to FY 2013-14. The Electrical Projects Division delivered Order Book growth of 135% at Rs. 287 crores and Turnover growth of 92% over FY 2013-14. The Air Fin Cooler and the Electrical Projects division have drawn up aggressive plans to deliver higher turnover and better margins during FY 2015-16. The Oil and Gas division has been geared upto focus on EPC opportunities in the domestic and overseas markets. STRENGTH AND OPPORTUNITIES • Track record of successful execution of large power contracts • In-house design and engineering capability • In-house capability to undertake and execute BoP packages. • Capability to manage multiple projects simultaneously • Professional management and expertise in project management • Cost Competitiveness • Well experienced and motivated employees with a good balance of young talent and experienced leadership team. The company is well placed to undertake contracts based on Customer requirement both in India and overseas. INTERNAL CONTROL AND AUDIT SYSTEMS As part of the audit system, the company has in-house experienced System Auditor and Works Auditor. For each division an external firm of Auditors carries out Internal Audit. For the Power Projects division, for each project, a separate external audit firm carries out the internal audit on a monthly basis. The detailed audit plan is well documented and audit scope is reviewed every year to include key processes that need improvements and address new compliance requirements. The detailed audit plan approved by the Audit Committee is rolled out at the beginning of each year. In addition, all payments to vendors are subjected to br-audit by an external audit team before physical release of the payment. The statutory auditors carry out the required audit and compliance checks and review the control systems in place. The Chairman of audit committee, key project personnel and the Finance team discuss the audit reports of the internal auditors, br auditors and inhouse auditors in detail every quarter and a time bound action plan is initiated to address the key audit issues that need improvement and resolution. A summary of key audit observations and action taken to fix the issues is reviewed by the Audit Committee members in the quarterly audit committee meeting. The brsent internal control and audit systems are considered to be adequate. RISK MANAGEMENT The business of the Company encompasses design at offices, manufacturing at factories and project sites, civil and mechanical construction, erection and commissioning of equipment’s / packages. The company has a well documented Standard Operating Systems and Procedures (SOSP). The SOSP mandates concerned officers of the company to review, identify and take timely mitigative steps to manage these risks on an ongoing basis. SOSP’s are periodically reviewed and updated. Delegation of Authority is reviewed each year to ensure that the business requirements and the commitments made to customers are met and procedural checks and balances are improved. An experienced team of contract specialists in the Company review all contractual documents with the customers and the vendors in detail to ensure that all risks associated with the terms of contract are identified and mitigated by suitable alternatives / plan. The Audit Committee regularly reviews the steps taken by the Company to identify, address and mitigate key operating and financial risks. HUMAN RESOURCE DEVELOPMENT The continuous focus on talent building over the last few years have yielded very good results and the company has in place a strong team of experienced and competent professionals. During the year the Company implemented certain employee centric initiatives to improve employee engagement and motivate the employees to be result oriented. Employee training and development activities were stepped up during the year. With a view to ensure competitiveness and effectiveness in operations, the Company continued its manpower rationalization measures across its sites and corporate office during the year. As a step forward towards institutionalization of contemporary people processes, a HR study was undertaken facilitated by renowned external HR Consultants. With a view to ensure participative approach, the consultants had interacted with a number of employees in order to elicit their views and expectations. Consequently, the areas of improvements were identified and brainstormed and based on their recommendations, a number of new Employee Engagements initiatives have been introduced in the areas of improving work-life balance, creating better living conditions at project sites, launch of interactive Intranet portal, organizing sports and cultural events etc which have been received well by the employees. These initiatives have gone a long way to boost the morale of the employees and many more such initiatives are in the offing. The manpower strength of the Company as on 31st March 2015 was 1689. |