Management Discussion and Analysis Report

A. INDUSTRY STRUCTURE AND DEVELOPMENTS

Indian economy has registered a growth in GDP of 7.3 % in spite of the Global slowdown. The same trend has been followed in the industry also. Accordingly there has been growth in the performance of the Company. With the initiative of the new Government in India there is a further wave of positive sentiment in the country.

The Company has achieved robust growth in all its business i.e. the Power Transmission & Distribution (T&D) business and the PVC Products business. The Company is in process of increasing capacities in both of these segments.

The Company, in keeping with its focus of becoming a global player in its Power T&D business has secured multiple contracts in various geographies, and it is expected that more than 30% of the revenue in the coming year will be from international business alone.

The Company has plans to expand its PVC business both vertically by adding more products into its portfolio as well as horizontally by adding new geographies. The company's target is to emerge as a Pan India brand in the near future.

B. OPPORTUNITIES AND THREATS

A developing country such as India needs to invest heavily on key sectors such as Power and Water. The new Government has not just maintained investments into these sectors but has increased manifold the short, medium and long term investments for these sectors. The company is clearly aligned with these plans of the Indian government with its offerings in the Power T&D and PVC piping space (Water distribution). Not just domestically but also globally the developing economies have increased their investments substantially on their Power and Water infrastructures development.

Although Indian economy has registered growth, overall global scenario is still in slow down phase. Continuous slowdown of global economy is likely to put a threat to the India Economy also the resultant impact of which will be on the Industry as well as on the Company. The Company is operating in a very cautious manner so as to be brpared to face the challenges that may come up in future. 

SEGMENT-WISE OR PRODUCT-WISE PERFORMANCE: The Company is operating in three business Segments :

1. Engineering Products

2. Infrastructure projects

3. PVC products 

Engineering Product Segment

The segment consists of:

1. Transmission Towers

2. Tubular Poles & Scaffoldings

3. Hot Rolled Product

4. Nuts & Bolts

5. Black pipes and GI pipes

The performance of this segment has improved as is evidenced from the improvement in the Net revenue of this segment which increased from Rs. 9553.82 millionin 2013-2014 to Rs. 11768.30 million in 2014-15 showing a growth of around 23%. The profit of this segment has increased from Rs. 903.64 million in 2013-14 to Rs. 1809.11 million in the year under review, which is more than double of the brvious year.

Infrastructure Projects Segment

This segment consists of EPC projects for the Power T&D industry as well as Trenchless Technology services for underground installation of utilities. The net revenue of the segment during the year under review has increased to Rs. 462.41 million from Rs. 270.09 million in 2013-14. Profit from this segment has marginally increased from 107.26 million in 2013-14 to Rs. 110.06 million in 2014-15.

PVC Products

The revenue from this segment has increased from Rs. 591.15 million in 2013-14 to Rs. 897.26 million in 2014­15 an increase of 52% over the brvious year. At the same time profit has also increased from Rs. 59.64 million in 2013­14 to Rs. 102.79 million in 2014-15 registering thereby a growth of 72 %.

D. OUTLOOK

The Power T&D business of the company is expected to post strong growth in the current year as well. On the domestic front, the Government of India has announced various initiatives and investments into this sector. Already the Power Transmission sector is being hailed as the next "sunshine" sector of the economy. Being one of the top three players in the manufacturing of Power T&D products, the company is expected to capitalize on this business prospect. On the international front as well, the company has already secured large contracts in the geographies of Latin America, Europe, Africa and Middle east. The order book of the company increased from approximately 1200 Crores in March 2014 to over 2450 Crores in March 2015 with almost a 50% share from International business.

The Company is going for expansion of its PVC division by setting up manufacturing facilities in northern and north eastern part of the Country. The outcome of which will be seen in the forthcoming periods. This division is expected to grow nationwide and make a valuable contribution to the growth of Company. The Company has entered into the technological tie ups with two foreign companies, who are pioneers in their respective field and have a global brsence. The Company has become the manufacturing partner of Sekisui a Japanese Company which is one of the world's leading manufacturers of CPVC compound, for manufacturing brmium quality CPVC pipes. Secondly the Company has entered into tie up with WAVIN, a Netherland based Company, which is one of the world's most renowned plumbing technology companies, for launching in India, the most advanced plumbing systems in the world. With these the Company is hopeful of becoming a Pan India brand in the PVC piping space in the near future.

E. RISK AND CONCERNS

Your Company is having a risk management policy for identification and assessment of risks which is monitored by the risk management committee of the Company. The Committee closely monitors the process and suggests suitable measures to mitigate the risks. The risks may be caused due to the internal factor which may be tackled by the prompt action from the management. However risks imposed by the external factors are not in the control of the Company and the same are identified as per the directive given by risk management policy of the Company. Necessary brcautionary measures are taken by the Company to negate the impact of probable risk.

Business Risk

The business risk is in general the risk imposed by the competition from the competitors. The Company has achieved such a milestone that the risk of competition is very rare. However the Company does not ignore the possibility of competition from other players. The company operates in a very dynamic way and all decisions by the management are taken considering all the possibilities.

Perception Risk

The Company is engaged in products which are used in transmission and distribution business as well as plumbing related products. However the products for T & D business are made of Steel due to which sometimes the Company is construed as belonging to Iron & Steel business. Sometimes the Company is considered as plumbing products related company. However the identity of the Company should be taken as a whole rather than a part of the business.

Financial Risk

Increase in operation cost as well as raw material cost poses financial risk to the Company. The impact of this risk is to some extent minimized with the escalation clause in majority of domestic orders. However the Company applies various strategies like purchase in bulk as well as import of raw materials etc. to minimize the impact of financial risk.

Interest Rate Risk

The Company is financed by various bankers and it is required to pay interest on various credit facilities used by it. The Change in rate of interest may be both favourable as well as unfavourable to the Company. The Company has availed credit facilities from various bankers and as a result the Company is in a better position to make negotiation with the bankers and take the benefit of competitive rate of interest.

Liquidity Risk

The liquidity risk may come in the way of smooth operation of the company due to one or the other reasons. Whenever there is blockage of funds in the hands of customers, the liquidity crunch is likely to happen. Although wholehearted support from the bankers strengthen the hands of the Company to face the liquidity risk, the company leaves no stone unturned to avoid the possibility of liquidity risk. Although management expects this kind of co-operation from the bankers, but things may go otherwise too for which the Management is very much concerned.

Market Risk

The Company is supplier in both domestic and international market. The market risk may origin either way be it global impact or government policy or due to competition from other players in the market. Due to in backward integration the Company is in a position to provide the products of better quality at competitive prices, which to a great extent minimizes the market risk due to Competition. In addition various promotional schemes initiated by the Company result in increase of market share for the products of the Company. The Company in brsent scenario has established such a place in the market that the possibility of market risk is remote.

Exchange Fluctuation Risk

The risk of Foreign exchange fluctuation can impact the Company as the Company is engaged in procuring various materials and machines from the overseas as well as the Company exports its products to foreign countries. This is a matter of great concern for the Company. The company has taken efforts to negate the impact of this risk by following the hedging of forex exposure. Although this involves a cost for the Company, but the company is saved from the probable loss due to fluctuation. 

F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The internal control systems as brvailing in the Company is commensurate with the size and nature of business of the Company. The Company has the system of Internal Audit. Internal Auditors regularly makes assessment of internal control in various areas of operation and report to the Audit Committee with their suggestion for the improvement of the same. Accordingly, the suggestion for improvement wherever deemed necessary are implemented immediately. In addition the management itself keeps continuous watch on internal control systems of the company.

G. DISCUSSION ON FINANCIAL PERFORMANCE WITH RESPECT TO OPERATION PERFORMANCE

During the financial year, the Net Revenue of the Company increased from Rs. 10415.06 million in 2013-14 to Rs. 13127.97 million in 2014-15 showing an increase of more than 26 percent. The profit before tax has increased substantially from Rs. 367.15 million in 2013-14 to Rs. 1365.68 millionin 2014-15. The EPS of the Company has jumped up from Rs. 2.72 in 2013-14 to Rs. 8.72 in 2014-15

H. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/ INDUSTRIAL RELATIONS FRONT INCLUDING NUMBER OF PEOPLE EMPLOYED

The operation volume of the Company is continuously increasing and so is the employee strength of the Company. At brsent the Company has approximately 1600 employees which comprises very high quality professionals at various levels from finance, engineering, technical, marketing and legal fields. Management organizes motivational events to enable the employees to give their best. Employees are provided with suitable training and guidance which assist them in performing their respective duties. Incentives and rewards on various platforms to the talented and result oriented employees act as motivation instruments not only to those who get but also to others to follow them. The Company has the policy to retain the talented persons by providing them a comfortable environment, pay and rewards.

I. FORWARD LOOKING STATEMENTS

The report contains statements concerning our future growth prospects which are forward looking statements, which involve a number of risks and uncertainties that would cause actual results to differ materially from those in such forward looking statements. Again the statements and projections may not materialize as the effect of various Government policies, changing market scenario, global developments can impact positively or negatively. The company assures no responsibility to publicly modify or revise any forward looking statements on the basis of new information. 

For and on behalf of the Board of Directors

Sajan Kumar Bansal Managing Director

Devesh Bansal Director 

Place: Kolkata     

Date: 28th July, 2015