EMCO Ltd


BSE: 504008 | NSE: EMCO | ISIN: INE078A01026 
Market Cap: [Rs.Cr.] 271 | Face Value: [Rs.] 2
Industry: Electric Equipment

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Management Discussions

MANAGEMENT

Economy and Market Overview

The slowdown in economic growth which began few years back extended in the financialyear 2012-13. The GDP growth reduced from 6.2% (previous year) to 5 % in the financialyear ended 31st March 2013 which is the lowest in last decade. The prevailingissues related to fuel linkage/ supply, high cost of fuel, delay in statutory clearances,financial constraints and land acquisition delayed the ordering of major electricalequipments. The sector that your company operates has also been affected by slowdown inrevenue growth due to overcapacity, slowing demand, high interest rates resulting inmargin compression.

Power Sector in India

In the 12th five year plan, the major focus is on new generation capacity,however power Transmission and Distribution also needs strong focus. The total generationtarget under the said plan is about 107000 MW whereas target for transmission line isabout 109440 Ckt km of line length and 270000 MVA of substation capacity.

In order to meet the growing power demand, strong transmission network is requiredbetween resource generation complex and bulk consumption centers. High capacitytransmission corridor comprising 765kV AC and +/- 800kV 6000MW HVDC system along with400kV AC and +/- 500/600kV, 2500MW/6000 MW have been planned to facilitate transmission ofpower from remotely located generation center to distribution center.

Presently, the T &D sector is facing challenges mainly on account of ROW (Right ofway) issues, availability of land, shortage of skilled labour and regulation of power flowdue to wide variation in demand on daily and seasonal basis.

The giant PSUs in the power sector plan to invest Rs 50,000 crores in various projectsalthough the private sector has been stymied by fuel scarcity and distribution losses. Amajor chunk of these investments will come from internal and extra-budgetary resources ofthe PSUs while the government will pump in close to Rs 10,000 crores through grossbudgetary support.

BUSINESS WISE REVIEW

Transformer Business

Inspite of slow-down in Power Sector due to high cost of funding and slow demand, yourcompany received considerable number of prestigious orders from various utilities andindustries.

During the year 2012-13, Thane Plant produced and dispatched 125 nos. large rating ofPower Transformers while Jalgaon Plant produced and dispatched 461 nos. medium &Distribution Transformers.

Company has now full-fledged manufacturing facilities to manufacture tanks up to 500MVA transformer with installed capacity of 200 MT/per month. This facility has beenapproved by various utilities including NTPC.

Thane Plant has now up-graded its manufacturing and testing facility upto 500 MVA, 400kV, 3 Phase Power Transformers. Plant has also installed State-of-Art Impulse Generatorhaving capacity of 2000 KVP, 200 Kilo Joules procured from Haefely, Switzerland.

Your Company has also started focusing on Service business with a long term view togrowing this business and is termed as "EMCO Care". This initiative hasbeen taken in order to provide authentic services for repair of own as well as other makeof transformers. Company is now registered with all major utility as authorized ServiceProvider for repairs of all kinds of transformers .

Project Business

Your company has positioned itself as a leading player in transmission of power. Thesynergy is achieved through two SBUs within our project business – Substations SBUand Transmission Lines SBU.

Sub- Station (SBU)

This Business is executing many 400/220/132 kV AIS (Air Insulated Sub-station) as wellas GIS (Gas Insulated Substation) projects for various utilities across the country.During the year, this Business has commissioned 8 projects across the country of 400 kV /220 kV / 132 kV Class for MSETCL, DTL, WBSETCL, HVPNL and other SEBs. This business hasalso strategically started quoting for turnkey EPC projects in select countries.

It has also carved out its own space in the fast growing GIS business segment aftersuccessful completion of 220 kV GIS Sub- Station for MSETCL.

This business is now gearing up to enter in the 765 kV market for substations as thissegment is expected to grow rapidly in the coming years.

Transmission Lines (SBU)

During the financial year 2012-13 this SBU has successfully commissioned 765 kVTransmission Lines having route length about 200 KMS. With the completion of the said linethis SBU has successfully commissioned Prestigious Lines of 765 kV Quad and 400 kV Quadhaving total route length of more than 500 kms.

Further this SBU has made stellar entry in 800 kV HVDC segment by bagging prestigiousorder of Rs 458 Crores from Power Grid Corporation. It has also received prestigious orderfrom an International utility for supply of towers from its Transmission Tower Factorysituated at Vadodara.

Presently this SBU is executing various Projects of PGCIL, SEBs and IPPs and expectedto strengthen the order book by aggressively targeting domestic as well as intentionalbusiness in select countries. This SBU will continue to be the growth engine for thecompany in the coming years.

Meter Division

We continue in our endeavor to meet the evolving requirements of added functionalitiesto create value for our customers and are gearing up to address the upcoming smartmetering market in the near future.

International Business

International Business offers single point access to all its customers worldwidesupplying Product and Solutions that meet various International standards like IEC, ANSI,DIN, SANS.

Consistently meeting International quality standards, your Company is today exportingits Products and Solutions to more than 40 countries including Americas, Europe, MiddleEast, Africa, South-East Asia and the Indian sub continent, to an impressive Internationalclientele that ranges from power utilities, oil and gas sector, mining, EPC contractorsand Industries.

2012-13 was a stellar year for International Business and this SBU registered year onyear growth of more than 200 %. Your Company also firmly established its presence in LatinAmerica by bagging an order for supply of 16 nos. large rating Power Transformers.

Your Company has aggressive plans for increasing the business of EPC Projects(Substations and Transmissions Lines ) and supply of Tower Steel internationally.

Going forward your company is confident of substantially increasing the percentage ofInternational Business in overall business. This growth will be through healthy mix ofcustomers across the Globe and across product segments without any dependence on specificmarkets.

Coal Mine-Indonesia

Production level of coal mines in Indonesia was over 1 million tons in last calendaryear 2012. In current year production level of coal would be around 2 million per annum.The Current coal prices are low, but in the long run our investment in the coal mineswould give a handsome return.

Renewable Energy

Your Company had commissioned its 5 MW Photovoltaic Solar Power Plant at VillageFatepur in Surendranagar district of Gujarat state in March 2012. The plant is doing welland generating sufficient green energy, so as to avoid 7,500 MT of Carbon emissions perannum.

Power Generation from 10.5 MW Wind Mills was reasonable in the last financial year andit is expected to remain unchanged in coming years.

IPTC Project

In this fast changing economic world, your company wishes to have some portion of itsincome through fixed sources i.e. Annuity Income, which will provide stable cash flow andprofitability to the company for the long run i.e. for around 35 Years.

With this objective the Company participated in the opportunities opened in theTransmission Sector by the Central/State Government (IPTC) under Ministry of Power Model,to execute transmission line projects on BOOM (build, own, operate and maintain) basis.

Your company had bid for some such projects on above said model in the state ofRajasthan. We are happy to report that the Company had already received LoI for one of theproject long back & very recently it received LoI’s for another two projectswhich are for setting up 220 kV or 400 kV transmission line and sub-stations which are tobe maintained for 35 years on BOOM basis.

The Company would invest in these projects, build and operate them for 35 years, inreturn, the company would earn a fixed income in the form of Annualized Transmission fromthe users of transmission line which would be the distribution companies of the state. Wewould be signing TSA’s with the distribution utilities for making us payment. Paymentterms are secured.

Internal Control

The Company has in place effective systems for internal control ensuring accurate,reliable and speedy compilation of financial information, safeguarding the assets andinterests of the Company and ensuring compliance with laws and regulations. The Companyhas an exhaustive budgetary control system and the management regularly reviews the actualperformance. The Company has also put in place a well-defined organizational structure,clear authority levels and detailed internal guidelines for conducting the businesstransactions.

The exposure in foreign currency transactions of the Company both in terms of import,export and exposure in overseas investments in subsidiaries have increased over the years.To mitigate the risks associated with the fluctuations in the foreign exchange, theCompany is taking adequate measures, however, risk associated with mark to market conceptremains.

Human Resource

"Human Resources Function at EMCO is going through an interesting and challengingphase, wherein it is focusing on optimally utilizing and rebalancing its manpower.Business continues to be challenging and the key to survival is taking up more and moreresponsibilities.

Keeping our Vision statement in mind to make EMCO a "Great Place to Work,"we conceptualized and rolled out many new initiatives like;

1. Management Development Centre, wherein Senior Emcoites went through bouquet ofactivities to access them on our Competency Framework. Development Center helped us toidentify potential as well as the ways to groom them further.

2. Appreciating your colleagues is one of the successful initiatives. The whole ideabehind this is to spread the positive culture of appreciating.

3. We at Emco, believe in Work Life Balance hence Engagement Activities have been givendue importance despite of business challenges. EMCO Premiere League (EPL), Value Day,Spouse Visit, Women’s Day Celebrations etc have been key events.

4. Automization of HR processes has been very effective and appreciated by manyEmcoites. A Step towards optimization of Information Technology for better monitoring andcontrol.

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5. Implementation of ‘Shadow Board’-an initiative for In-House LeadershipDevelopment

At all levels, the Company continue to focus as a part of its vision to make EMCO a "GreatPlace to Work".

Environment and Safety:

Being a responsible corporate citizen an effective environment and safety managementsystem exists in your Company. All manufacturing units of the company are certified withISO 9001: 2008 for Quality Management System, ISO 14001 : 2004 for Environment ManagementSystem and BS OHSAS 18001 : 2007 for Occupational Health and Safety. The certification isaccredited to UKAS & NABCB.

Your company is committed to safety at work place, which was also acknowledged by theNational Safety Council of India (NSCI) in 42nd National Safety Day Celebrationat Thane Plant. Your company’s safety anthem audio was also release as a part of thiscelebration.

Mr V B Sant - Director General of National Safety Council has participated during 42ndNational Safety Day Celebrations and appreciated the efforts of the Company towardssafety. Pixel of Company’s 42nd National Safety Day Celebration was alsopublished by National Safety Counsel in its " Industrial Safety Chronicle no -4" Vol . No XLII Jan – Mar 2013

One of Emcoites was elected as Member on the Board of Governors of the "NationalSafety Council".

As a part of organization health and safety (OHS) the Company has organized health campat all the locations where the company does business, more than 770 Emcoites wereparticipated in the camp and got their health checked from the Doctors.

The Transformer Manufacturing Unit of the Company at Jalgaon has achieved continuous766 accident free days in safety implementation and under constructional sector, for thesuccessful execution of the turnkey project of Substation for DTL at Wazirpur site byachieving Zero fatality till date (662 days).

CSR - Initiatives towards Corporate Social Responsibility:

Your Company has taken various initiatives towards the Corporate Social Responsibilitythrough its extended arm EMCO Foundation. EMCO Foundation (EF) was established to promotesustainability and welfare of humanity with a vision "To transform lives throughsustainable development involving stakeholders." Since inception EF havetransformed lives of more than 39,368 people through our initiatives in Education(Akshar), Environment (Ankur and Roshni) and Healthcare (Jeevan).

Environment (ANKUR):

Under our ‘Ankur’ project plantation of 100 trees and maintaining theearlier planted ones was done by EF. Through elocution competition of school student EFhave created awareness about the preservation and promotion of good environment and so farEF has planted 1860 trees.

Healthcare (JEEVAN):

Like earlier years, the blood donation camps are organized under project Jeevan.EMCOites participated enthusiastically and contributed in the noble cause of savingsomeone’s life. Through the camps organized at various locations 308 units of bloodswere collected. So far we have collected 1326 units of bloods which are given to reputedblood banks in the area.

Education (AKSHAR):

Keeping in mind Government of India’s policy of Right to Education (RTE) we havedesigned our interventions under umbrella program "Akshar" through threepronged approaches for under privileged school going children.

Firstly, through’ "Shiksha" project an initiative of creatinginterest among under privileged slum children of age group 6-14 yrs for education andmotivating parents to enroll them for mainstream education, this year 400 childrenreceived basic education of English, Marathi and Arithmetic. This is a life time treasureof knowledge and education interest for these children. So far EF has supported 11870children through this initiative.

Secondly flagship program Parivartan- a soft skill development initiativehas transformed lives of 5783 students of 8th, 9th & 10thstd. this year. Health awareness and career guidance has given them a suitable directiontowards better & successful life. This project has benefited to 18205 students so farin transforming their lives.

Lastly under "Yashasvi" project we supported 45 needy SSC scholarstudents of Municipal schools and trust run school with scholarship support for continuingtheir education up to graduation. So far EF supported 257 students who are doing well intheir post SSC education.

Forward Looking Statements

Certain statements in the Management’s Discussion and Analysis describing theCompany’s objectives, projections, estimates, expectations or predictions may beforward looking statements within the meaning of applicable securities laws andregulations. Forward looking statements are based on certain assumptions and expectationsof future events.

The Company cannot guarantee that those assumptions and expectations are accurate orwill be realized. Actual results could differ from those expressed or implied. The Companyassumes no responsibility to publicly amend, modify or revise any forward lookingstatements, on the basis of any subsequent developments, information or events.

On behalf of the Board of Directors
For EMCO Limited
Sd/-
Mumbai Rajesh S. Jain
9th May, 2013 Chairman
   

Peer Comparison

Company Market Cap
(Rs. in Cr.)
P/E (TTM)
(x)
P/BV (TTM)
(x)
EV/EBIDTA
(x)
ROE
(%)
ROCE
(%)
D/E
(x)
B H E L 56,172.42 16.21 1.70 3.53 23.7 23.4 0.03
Siemens 31,917.24 172.70 7.92 32.11 4.4 5.2 0.00
A B B 22,003.70 112.26 8.22 30.47 6.7 12.5 0.18
Havells India 15,133.80 30.80 7.11 16.30 23.9 28.4 0.08
Crompton Greaves 12,009.52 24.01 3.59 11.45 16.3 22.9 0.01
Alstom T&D India 8,546.95 65.58 6.85 19.03 10.9 17.1 0.42
Suzlon Energy 6,090.82 0.00 2.17 0.00 0.0 0.0 2.09
ALSTOM India 3,629.75 26.16 3.93 6.60 18.1 22.6 0.00
Schneider Elect. 3,319.90 0.00 29.23 65.60 0.0 0.0 0.91
Triveni Turbine 3,020.90 47.44 16.68 20.69 42.4 59.9 0.03
V-Guard Inds. 2,164.57 31.90 6.80 11.73 24.2 26.1 0.47
Techno Elec. 1,609.93 23.36 2.58 6.90 11.7 11.0 0.31
Apar Inds. 1,300.86 20.46 2.14 3.94 11.8 17.4 1.52
TD Power Sys. 1,071.49 31.51 2.20 9.66 8.0 12.3 0.07
Matra Kaushal 1,050.86 0.00 51.08 0.00 0.0 0.0 0.01

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Key Information

Key Executives:

Rajesh S Jain , Chairman  

Shailesh S Jain , Vice Chairman  

S V Deo , Director  

Bheru Choudhary , Director  


Company Head Office / Quarters:
N-104 MIDC Area,
,
Jalgaon,
Maharashtra-425003
Phone : 91-257-2272462/2272572
Fax : 91-257-2272598
E-mail : emco.jelgaon1@emcoindia.com
Web : http://www.emcoindia.com
Registrars:

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