MANAGEMENT DISCUSSION & ANALYSIS The company is an Engineering, Procurement and Construction (EPC) contracting company in the power transmission and distribution networks across India and global markets with key brsence in Asia, Africa and North America. It undertakes turnkey projects offering a complete range of services in design, engineering, procurement, tower testing, manufacturing, construction and project management. Over a period of time, it has developed global business in forty countries. Industry Overview India is experiencing strong economic and population growth, rising living standards with declining inflation trend which account for rising electricity demand. India is at an evolving stage in its growth story. Following the decisive outcome of the last national election, policy reforms are regaining momentum. Government's 'Make in India' programme to facilitate investment to build manufacturing infrastructure coupled with lower oil prices will boost growth prospects. The program signifies an attitudinal shift in how India relates to investors: not as a permit-issuing authority, but as a true business partner. Over 2014-2035, globally cumulative investment of $16.4 trillion is needed across the power sector with an annual average of $740 billion per year. About 58% of power sector investment is allocated to the construction of new power plants and refurbishment of existing ones; the remainder is used to build and refurbish transmission & distribution (T&D) networks. In the New Policies Scenario, India's power sector investment requirements total $1.6 trillion (fourth-largest in the world) over 2014-2035, with 60% needed for new power plants and 40% for expanding T&D networks. [World Energy Investment Outlook] India's Power Transmission networks constitute the vital arteries of the entire power value chain. It goes without saying that the growth of power sector is contingent to development of a healthy transmission network. With over 280,000 circuit kilometers, India's transmission network is one of the largest and most complex in the world. Ministry of Power recognizes that power evacuation is turning out to be a bigger challenge than the power generation. With this, transmission projects continue to be accorded a high priority in the context of the need to evacuate power from generating stations to load centres, system strengthening and augmentation of National Grid. Meeting future investment needs will require calling upon the financial resources of both the government and private investors, domestic and foreign. Foreign direct investment (FDI) to India's power sector had brviously been capped, but reform in the recent past permit FDI in power sector under the automatic route. Challenges and Strategy India's economic growth rate has declined in recent years, to 4.1% in 2013 from 7% to 8% or more over the past decade. The power sector in India has experienced financial difficulties in the recent years. The brssures on government and private sector funding have created cash crunch across the entire infrastructure development chain. Clearly, this is a phase of pain for the infrastructure sector in India. In the recent past, your Company has been a victim of challenging unforeseen circumstances like execution bottlenecks, rising interest cost and delays in payments from customers. With this, revenue and profits suffered creating imbalance between the Company's ability to generate cash and service debt. During the year, accessibility to adequate working capital accelerated delay in execution, erosion of margin, reduced profitability and availability of cash for operations leading to debt accumulation. To overcome the brsent phase of industry-wide liquidity crunch, lenders amongst themselves, with State Bank of India as the leader, formed a Joint Lenders Forum (JLF) under RBI's JLF framework to restructure the Company's debt. Today, the Company is focused on optimizing its strategy and operations to overcome the brsent economic and financial challenges. Risks Management and Internal Control As an EPC contracting company with global brsence your Company is exposed to various risk associated with turnkey projects. The Company has set up risk management system to understand, measure and monitor the various risks to which it is exposed and to ensure that it adheres, as far as possible, to the policies and procedures established by it to mitigate these risks. The Company has in place effective systems safeguarding the assets and interest of the Company and ensuring compliance with law and regulations. The Company's internal control systems are supplemented by an extensive programme of internal audit conducted by external auditors to ensure adequate system of internal control. Audit plans, internal auditor's observations and recommendations, significant risk areas assessments and adequacy of internal controls are also periodically reviewed by the Audit Committee. The Company has ERP system - SAP, to have better internal control systems and flow of information. Segment-wise performance and outcome The Company is in the business of execution of projects relating to power transmission and distribution and hence operates in a single business segment. Performance of the Company has been dealt with in the Director's Report. Human Resource The Company recognises that organisational growth is directly related to the continuous growth and development of its employees. The Company organises various training programmes to enhance skills of the employees and equip them to meet the growing organizational challenges and achieve greater productivity. The Company is maintaining cordial relations with its employees and currently employs about 1,379 employees in all categories. Cautionary Statement Forward-looking statements are based on certain assumptions and expectations of future events. The company cannot guarantee that these assumptions and expectations are accurate or will be realized. The company assumes no responsibility to publicly amend, modify or revise forward looking statements, on the basis of any subsequent developments, information or events. Actual results may differ materially from those exbrssed in the statements. Important factors that could influence the company's operations include cost of steel, aluminium and zinc, changes in government regulations, tax laws, interest rates, abrupt currency fluctuations, economic developments within the country and such other factors. For and on behalf of the Board S. D. Kshirsagar Chairman Place : Mumbai; date : 13th August, 2015 |
