The financial year 2015 - 2016 has proved a challenging one for capital goods and the power sector at large. Today the manufacturing sector contributes over 15% to India’s GDP. To stimulate and grow this sector the Prime Minister has launched the ‘Make in India’ initiative which is expected to start yielding results soon. However demand for capital goods is not growing at a fast enough pace and demand must be generated if the pitfalls over supply are to be avoided.
The Transformer business this year has achieved a huge milestone in production – our factory has produced at the highest level ever seen in the company. We also booked the largest order ever received by us from a state electricity board. Price levels and therefore margins unfortunately remain depressed. To combat this we have increased our push into the industry vertical and doubled our marketing and sales efforts. As a result our enquiry levels have risen by over 20%. Our presence in the fast growing renewable energy sector has also increased.
The Motor business has seen the overall market shrink in terms of numbers and mega watts. This has led to severe price erosion. To combat this we have focused on reducing our working capital and increasing our market penetration. Despite the tough market we have increased our market share. We are also happy to announce the development and launch of a super premium efficiency motor conforming to international standards. The Project business has seen a decline in the topline. This is because we have chosen to stay away from risky projects with unviable margins. We will focus on private business where project risk is substantially less. This strategy has worked well for us and all new projects have been completed within budget and on time. We have re-established ourselves in the 220kv segment by commissioning a cement substation for one of the largest cement companies in India and bagged a prestigious wind power project.
The Drives and Automation division has seen a 30% increase in EBITDA despite sales being flat. This is a great achievement in increasing efficiency of our business. We have plugged a hole in our portfolio by launching a new product that will cater to general purpose industrial applications. The coming year we will endeavor to make inroads into the Textile, Metal and Packaging segments. The Elevator Systems Division has been renamed The Magnet Technology Machines division. We have witnessed 7% growth focusing on top tier customers. In a recent breakthrough we have received clearance on our quality and processes from a large and reputed elevator manufacturer. We are hoping to capitalize on this and generate business from them.
The Brexit has left an already sluggish world economy in an even more edgy state and credit might be tighter in years to come. The IMF World Economic Outlook Update predicts that India will grow at 7-7.75% in the coming year despite uncertainties in the global market. More initiatives like ‘Make in India’ and ‘Digital India’ are required to sustain and push growth forward. India’s upper house passed the biggest reform to taxes in decades. The goods and services tax bill aims to simplify the system by replacing a number of tax rates with a single levy. This is a great and long overdue step, but several implementation challenges lie ahead as the transition may not be as smooth as we may like. Nevertheless, ease of doing business will increase. We look forward to more such reforms and regulatory changes and remain optimistic in the long run.