MANAGEMENT DISCUSSION AND ANALYSIS While the overall Industrial sector was flat during 2015-16, it is expected that Railway will be a constant driver for generation for more business with an expected growth rate above 8%. Rapid industrialization, more Metro rail projects, High speed trains and ongoing MRVC project / Madhepura project is expected to support the Business in the next 3 to 5 years. These projects come with a steady demand for Axle mounted Gears and Engine spares. Existing ongoing Thermal Power plant projects along with constant demand for Captive Power Plants are expected to drive a sustained growth of 8 to 10% in coming years. Infrastructure related industries viz., Cement, Concrete Mixer, Off-highway equipment, Crushers, Hot-mix equipment, Cranes, Loaders, Stone mining, etc. are expected to maintain a constant demand for various gears and gearboxes in the Business. Review of business Industry scenario Your Company is in the business of design, manufacture, supply and servicing of gears and gear boxes. The bulk of this market is serviced by five major national players while a fair portion of the market is met through imports. Import of gearboxes happens brdominantly in the safety critical applications and high technology areas such as gearboxes for wind turbine generators, power plants and marine applications. While most of these are imported from Europe, China caters to the demand in other segments. There are two major segments in the gear box industry, namely the standard segment and the customized segment. It is estimated that the standard gearboxes constitute about 35% of the market and the customized segment about a third of the market. Loose gears make up the balance. The market this year has been largely static. The market for gearboxes is trending towards higher sizes due to larger capacities being planned by the various users. Accompanying these trends is the scale-up in capital equipment sizes. Newer technologies, energy efficiency and space reduction are emerging as key drivers in the gear box industry. India, in recent years, is witnessing a growth in the planetary gearbox segment signaling a maturing of the market. Review of performance While your Company services the needs of standard gearboxes, it differentiates itself through focus on supply of customised non-standard gearboxes. In addition, the Company also sells internals and spares (loose gears), and services any make of gearbox. During the year, the Company reported a revenue of ` 162.42 Crores, 7% higher than the brvious year, also grew its orders booked during the year by 8%, Continues to put efforts to enhance brsence in the market especially in key user locations. The approach involves enhancing its reach by strengthening its Sales and Service teams, building references in high potential segments, entry into the defence segment and building its capability in certain high end applications. The Profit before Tax for the year was at ` 23.46 Crores, against ` 13.11 Crores in the brvious year with a growth of 79%. Company’s focus on enhancing service levels, growing in profitable segments, improving operating efficiencies and specific cost reduction initiatives has resulted in higher profitability than brvious year. The Company continued to invest in human resources, its key strength, with a view to building a pool of talented people to lead the Company into the future. Skill development and employee engagement initiatives continued to receive high attention. The Company undertook capital expenditure facilitating improvements in efficiency and productivity and building capability. While the Company took several steps to maintain control over its working capital, higher inventory levels were necessary to service requirements of customers. The Company remains debt free and invests its surplus funds judiciously ensuring safety and appropriate returns. The Product development initiatives of the Company are in line with market and customer requirements. Company developed new gear boxes which are import substitutes and expects to get more orders from this segment in the near future, also continued to invest in building strong capabilities in Planetary gearboxes. The Company remains confident that the future is positive given the confidence of its customers on the Company’s products, service and its ability to provide lasting value. Expectations of a more conducive economic environment especially with the initiatives of the government to revive manufacturing growth in India augur well for the Company. Internal Control The Company has an Internal Audit system commensurate with its size and operations. The internal audit is carried out by external experts covering key aspects of the business. The internal team periodically evaluates the adequacy and effectiveness of internal controls. The Audit committee reviews the plan for Internal Audit, significant internal audit observations and its satisfactory closure and functioning of the internal audit department on a periodical basis. On behalf of the Board M M Murugappan Chairman Date : 27 April 2016 Place : Coimbatore |
