From The ED’s Desk About Us

Shome Danani
Executive Director

Dear Shareholders,

In its latest India Development Update, the World Bank has said that Indian economy “continues to show resilience” amid global uncertainties. In spite of the various issues that the global economy is facing, India has been one of the fastest growing economies in the world. Overloaded supply chains, and rising borrowing costs are expected to weigh down the economy and reduce overall consumption for the coming financial year. As a result, the World Bank has reduced its FY 2023-2024 GDP forecast for India from 6.6% (in December 2022) to 6.3%.

The Transformer business topline registered 4% growth for FY 2022-2023. Over the last 10 years the transformer business has been through a deep cycle with overall demand being relatively flat. In order to combat this, we implemented a business development program a few years ago to increase non-tendered business from customers. This effort has borne rich dividends and has enabled us to grow our unexecuted order book by almost 50% (in Rupee terms) as compared to the previous year. The order book now stands at its highest ever. While some players have dropped out of the market many new ones have emerged and thus pressure on the product price remains. The Government’s push towards renewables and power as a whole is expected to hopefully increase demand in the years to come. Power sector reforms are expected to improve the health of various state utilities. We will continue to focus on growing the non-tendered business, the emerging data center market, and the industrial business as a whole.

The Motor business has grown 16% over the previous financial year. Our drive to expand geographically has bolstered sales in many new territories. This has contributed significantly to our growth. Increasing and strengthening our channel network has also been a major initiative for us. Dealer support and quality customer service through our in-house developed platforms have been appreciated by all. A refined supply chain has helped us achieve one of the highest product availability rates in the market. In order to manage our growth, we have developed vendor capacity to support future expansion. Our ongoing cost optimization exercise has been a big accomplishment. This has played a key role in achieving our desired profitability. Volatile raw material prices, and some new competitors increasing their market presence, are sure to put pressure on the sales price in the coming year.

The Projects division has done well to grow almost 400%. It should be noted that, owing to Covid, in the year FY 2021-2022 billing was low, and so the year on year increase is substantial. That aside it has been a good year and we crossed a number of milestones. Order booking has been at a record high. The year saw the booking of our largest order ever in Rupee terms from a single client. We were also able to secure and consolidate our presence in the GIS (Gas Insulated Switchgear) substation space. This was an important breakthrough as it opens up a much larger market for us. Execution quality has been of a high level and we were able to execute all projects with minimum working capital and before the due date. Rising raw material prices, volatile metal prices, and an erratic dollar to rupee rate, all pose a challenge in the current environment and must be monitored carefully.

In the Drives and Automation topline is up 38% over the previous financial year. E-mobility has been a focus area for us and is in line with the Government’s vision of zero emission by 2070. The division has procured some breakthrough orders with e-bus manufacturers and these orders are under execution. Our in-house developed IIOT (Industrial Internet of Things) solutions cater to the areas of predictive maintenance and OEE (Overall Equipment Effectiveness). OEE is a measure of how well a manufacturing operation is utilized as compared to its full potential. In this regard we have implemented pilot solutions in production monitoring and the feedback is positive. Supply chain challenges persist as long lead times for items like semiconductors and electronic cards lead to build up of inventory.

The Magnet Technology Machines division has grown by 39%. Although demand for our gearless machines has increased, margins have been under pressure owing to competition from the Chinese and domestic players. Exports to Europe particularly have also been hurt due to the fallout of the Ukraine conflict. On a positive note our indigenously developed servo motors, supplied in an integrated solution by our Drives and Automation vertical, have been working well, and reviews have been encouraging. A smaller range servo motor is under development; this will cater to industries like textiles, packaging and printing. The successful in-house development of these motors has been a great achievement.

The recent turmoil in financial markets, the war in Ukraine, and three years of Covid have all taken a toll on the world economy. When will the era of high inflation end? Many investors have been hoping for a return to a fairy-tale economy with healthy rising company profits and a falling cost of capital. IMF Deputy Managing Director Gita Gopinath at a recent conference said that markets were being “too optimistic” about what it would take to bring down inflation. The longer inflation stays, the harder it is to bring it down. Thus the aggressive stance by most central banks. On a more optimistic note, there has been a recent softening in material prices and US inflation is below 5% for the first time in two years.

In the Indian economy the higher cost of finance may have slightly dented buoyant economic activity but in general corporate India has had a good year. Looking ahead there are many positives for India to capitalize on. The world is looking for an alternative manufacturing base with respect to China. India can play this role if it pushes the right reforms and readies itself. India recently overtook China as the world’s most populous country. India can reap what is known as “demographic dividend”, the potential economic growth resulting from having a large working age population. The Government has in the recent budget started committing larger amounts of capital toward varied infrastructure projects. All these will augur well for India in the years to come. We look forward to the execution of the various initiatives being implemented.