MANAGEMENT DISCUSSION AND ANALYSIS REPORT ECONOMIC OUTLOOK The Asian Development Bank (ADB) has forecast that India's growth rate could surpass China on the back of Government's pro-investment attitude, which coupled with improvement in macro-economic indicators and forward movement in resolution of structural bottlenecks has made the Country stage a comeback on foreign investor radar. India is set to expand 7.8 % in FY 2015 compared with 7.4 % growth in FY 2014. The momentum is expected to build to 8.2 % growth in FY 2016, aided by expected easing of monetary policy and pickup in capital expenditure. Giving a thumbs up the new Monetary Policy Framework, announced in the budget, would help in restraining inflation and improve coordination between monetary and fiscal policy, the ADB said. BUDGET IMPACT Bold, growth oriented and inclusive sums up the reaction of the economists, analysts, corporate honchos and market experts. The budget has significantly re-emphasized the role of public expenditure in infrastructure projects. The plug and play model will create a project ready and then hand it over for investment. The budget focuses on ease of doing business. The proposed ebiz portal would help in tracking all the approvals, combined together, on an electronic basis. The budget recognizes that in PPP models, the Government has to take the maximum amount of risk and then rebalance it. The budget has also attempted to overturn the whole architecture of soviet or British imperialistic system towards a more participative society. It is heartening to note that projects worth Rs. 2.50 Lac crore have been put on Fast Track since Budget. POWER SECTOR/ EQUIPMENT INDUSTRY OUTLOOK At the recently concluded World Economic Forum 2015 in Davos, the Power Minister stated that the Sector would be looking at an investment of nearly Rs. 15 trillion over the next few years. This offers vast and rewarding opportunities for players across the value chain. Some of the most exciting opportunities in the pipeline lie in the distribution segment. Large investments have been committed at the Central and State levels and closure of projects are already under way across all states for loss reduction, metering, GIS, SCADA, physical network upgradation etc. All these programmes offer long-term opportunities for equipment suppliers, project executors and technology specialists, among others. The two newly launched programmes the Deendayal Upadhyaya Gram Jyoti Yojana for agriculture feeder separation and the Integrated Power Development Scheme for improving urban power infrastructure will provide continued business opportunities for vendors till the end of the 13th plan (March 2022). A key game changer would be the Government's move to introduce competition in Distribution, as has been proposed in the amendments to the Electricity Act, 2003. This could offer lucrative business avenues for vendors as utilities wire be forced to invest in building stronger networks to brvent consumer migration. A lot, however, will depend on how quickly things get rolling at the State level. Such issues, notwithstanding, there are high hopes from the reforms - oriented new Government, and the Davos message reinforces that sentiment among global investors, encouraging them to invest in the Power Sector growth story. TRANSMISSION: br-EMPTIVE MEASURES & NEW TECHNOLOGIES The Transmission segment has witnessed a number of technology changes over the years, driven by the need for making the system more robust. A key initiative in this context is a mega project conceived by PGCIL called the Unified Real Time Dynamic State Measurement (URTDSM), which seeks to deploy Wide Area Monitoring systems (WAMs). The URTDSM roll out follows the successful completion of a WAMs based pilot project. Apart from the challenges posed by grid complexity, additional voltage and stability problems are caused by the increase in transmission length, grid — connected variable Renewable Energy Generation and network synchronization across the Country. The Flexible Alternating Current Transmission System (FACTS) offers a mature technology solution. Further, utilities can deploy technologies, such as, high temperature superconductors, HVDC transmission systems, high efficiency transformers, super conducting transformers etc. to improve efficiency and reduce losses. TRANSFORMER TECHNOLOGIES - RECENT ADVANCES A quantum leap in energy demand, along with the high level of transmission and distribution losses, growing renewable energy penetration in the gird, shift to higher voltage levels etc., have led to the emergence of new Transformer technologies Of late, one of the significant technological advancement in the industry has been the deployment of phase shifting Transformers. Also, with a shift towards the HVDC system for transmitting bulk power over long distances, the use of converter Transformers has gained momentum. Further, power transformers are increasingly being equipped with multiple intelligent electronic devices or control systems that can assess the condition of the transformer system and make intelligent recommendation based on design and component data with such smart transformers, the asset owners can remotely monitor the behavior of the transformer core, windings, oil, tap charger, bushings etc. Going forward, with the Country moving towards smart grid infrastructure, the use of advanced Transformers is likely to gain momentum. Moreover, the need to reduce the Industry's carbon footprint will result in the emergence of energy efficient technologies. CURRENT BUSINESS ENVIRONMENT AND FUTURE PROSPECTS Cumulative production of power transformers for the period Dec 13 to Nov 14 stood at 1,45,078 MVA (Source: IEEMA). Earlier, the highest annual production recorded is 1,78,782 MVA. Based on projections released by Planning Commission in June 2012 with regard to addition of generation capacity, the demand should have been much more. So, it is obvious that market demand has not picked up as was estimated. Hopefully, demand will pick up in the last 2 years of the Current plan period (2015-16, 2016-17). If the capacity utilization remains around 65%, margins will continue to be under brssure. OPPORTUNITIES AND THREATS India has just launched an ambitious foreign trade policy that aims to nearly double exports to $ 900 bn within next 5 years. The focus of the policy is to promote exports of value added and labour intensive manufacturing as well as services. Incentives or subsidies will be given for the export of specific goods to specific markets. Simplification of procedures is expected to go a long way in integrating India in the global value chain. Exports of electrical equipments from India is approximately 1% of global trade. This leaves a huge opportunity for equipment manufactures to suitably tap the market and push up India's share. If domestic demand, for some reasons, remains subdued, at least in the short term (upto March 2017), exports can vastly improve equipment manufactures' capacity utilization. The critical issues associated with exports are consistent quality, timely delivery, proper packing of accessories and prompt response. India's image for this has not been very good in theses respect. If these threats could be converted to opportunities, and complaints could be transformed into competitiveness, then certainly India's share of global trade can progressively improve. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has a well-established system of internal controls and Internal Audit commensurate with its size and complexity of the business. Your Company has appropriate internal control systems for business processes, with regards to efficiency of operations, financial reporting, compliance with applicable laws and regulations etc. All parameters are monitored and controlled at regular intervals. Internal audits are conducted by experienced firm of Chartered Accountants in close coordination with the Company's finance department. The findings of the Audit team are discussed internally as well as in the Audit Committee meetings. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them from time to time. The Company is continuously upgrading its internal control system by adding better process control, various audit trails and use of external management assurance services. MAJOR DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT Human Resources Development plan is integral part of T&R's People Development Philosophy and commitment. The Company continued its drive to institutionalize and upgrade its HR processes. Detailed Manpower Assessment Study in association with expert team in a scientific way to derive the optimum manpower and to enhance overall productivity was successfully carried out, this has enabled identification of internal talent for deployment at effective positions benefiting to individuals and organization. Continuous thrust has been given to various engagement initiatives throughout the year as a part of effective engagement strategy. STANDALONE BASIS Total income of the Company has decreased to Rs. 54,519.23 Lacs in FY 2014-15 from Rs. 72,232.20 in FY 2013-14. Total loss before tax for the FY 2014-15 is Rs. 960.81 Lacs as against the total profit before tax of Rs. 766.52 Lacs for the brvious FY 2013-14. Loss after tax for FY 2014-15 stood at Rs. 645.20 Lacs compared to Profit after tax Rs. 480.51 Lacs during FY 2013-14. CONSOLIDATED Total income of the Company has decreased to Rs. 55,641.69 Lacs in FY 2014-15 from Rs. 73,573.60 in FY 2013-14. Total loss before tax for the FY 2014-15 is Rs. 1,127.69 Lacs as against the total profit before tax of Rs. 932.23 for the brvious FY 2013-14. Loss after tax for FY 2014-15 stood at Rs. 803.17 Lacs compared to Profit after tax Rs. 518.79 Lacs during FY 2013-14. CAVEAT This section of the Annual Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Shareholders and Readers are cautioned that in the case of data and information external to the Company, though the same are based on sources believed to be reliable, no rebrsentation is made on its accuracy or combrhensiveness. Further, though utmost care has been taken to ensure that the opinions exbrssed by the management herein contain its perceptions on most of the important trends having a material impact on the Company's operations, no rebrsentation is made that the following brsents an exhaustive coverage on and of all issues related to the same. The opinions exbrssed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic, and increasingly fraught with risk and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views exbrssed herein. Readers are hence cautioned not to place undue reliance on these statements, and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions exbrssed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements exbrssed in this report, consequent to new information, future events, or otherwise. |