MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry Your Company is engaged in Electrical Industry which comprise of Rotating Machines Group, Static Equipments, Switchgears, Transformers, Capacitors, Transmission Lines etc., Slowdown in the economy affected growth of the business segment as demand for capital goods generally follows a cyclical pattern depending on the overall economic scenario and the investment priorities of the Government. Several upcoming projects were postponed because of liquidity crunch and negative businesssentiments. Nevertheless there are signs of revival and economy may perform better in the coming fiscal year. The Company has taken several bold steps to remain competitive and to ensure survival by reducing cost, rationalising manpower and streamlining operations. The strong brand image of the Company's products on account of our stress on quality puts us in an advantageous position. Opportunities and Competition The industries to which we cater to and diversified portfolio of our products provide consistent demand for our products overall. We are also trying to innovate and further diversify our range of products. With the policies of the new Government the Indian Economy is expected to do better. There is a considerable energy deficit in the country. This provides significant opportunities to share in the chain of power business for our different product lines. The strong brand image of the Company's products on account of our stress on quality and a broad network of our dealers/service centers put us in an advantageous position. It may be noted that the Company has no control over the external factors as a result of which the actual performance may vary from the expected. The Generator as well as the Motor manufacturing industry is highly competitive, both in India and internationally. Many large corporations in domestic front and international front are competitors to the Company. These corporations have access to advanced technologies, greater reach and largerfinancial resources which may benefit them with economies of scale and operating efficiencies. Competitors may be able to sell their products at prices lower than the Company's, which may have an adverse effect on the Company's market share and results of operations. Threats The existing uncertainty over policy decisions and delayed project clearance coupled with weakening rupee and increase in cost of funds could result into slower revival of the capital good industry. The Industry is becoming highly competitive. GDP growth of India may fall below expected. The actual performance may differ, as it is dependent on several factors beyond control of the Company. Segment wise or product wise performance The Company has identified the reportable segments as Rotating Machines Group, Power Generation and Distribution Group and Others, taking into account the nature of products and services, the different risks and returns and the internal reporting systems. Exceptional Items Exceptional items for the year ended March 31, 2015 of Rs. 2,383.31/- lakhs includes net profit on sale of assets Rs. 14,000.85/-lakhs and net loss of Rs. 16,384.16/- lakhs on sale of investment Future Outlook Global economies appear to be going through a phase which is having greater share of volatility than that of stability. High interest costs, low corporate investments, high inflation and trade deficits continue in this fiscal. Measures are needed from the Government to kick-start the investment cycle growth. There is no visibility of a sustained Global recovery and Euro-zone economic sluggishness continues unabated affecting India's economic growth. Low industrial growth, unfavorable investment climate have resulted in the Company's domestic order book reflecting sluggishness as in Fiscal 2014-15. Nevertheless, the various industries to which the Company caters are expected to better again and demand from them will pick up again. The overall long term view is positive. In view of the above, the company is hopeful of recording operating performance this fiscal improved. Risks Mitigation Measures The Company recognises the above major risks and has initiated the following measures for mitigating the above business related risks: The Company upgrades its engineering strength and design capabilities by incorporating latest technologies in its products. Reduction in production-distribution costs and improvement in operating efficiencies are continuously pursued enabling it to offer competitive prices. The wide portfolio of products gives the Company a competitive advantage, as we can cater to the major verticals of the power generation industry. The Company recognises the importance of its supply chain in sourcing good quality raw materials and other inputs at competitive prices with high reliability in meeting delivery timelines. Internal Control System The Company has established adequate internal control procedures commensurate with the nature of its business and size of its operations. To provide reasonable assurance that assets are safeguarded against loss or damage and that accounting records are reliable for brparing financial statements, management follows a system of accounting and necessary controls are reviewed by internal audit process. Internal controls are evaluated by the Internal Auditors and supported by Management reviews. All audit observations and follow up actions thereon are initiated for resolution by the respective functions. For and on behalf of the Board of Directors of Kirloskar Electric Company Limited Vijay R Kirloskar Executive Chairman Place : Bangalore Date : August 13, 2015 |
