Triveni Turbine Ltd

TRIVENI TURBINE LIMITED ANNUAL REPORT 2011-2012 MANAGEMENT DISCUSSION AND ANALYSIS ECONOMY Domestic Scenario In financial year 2011-12, India found itself in a conflict of managing growth and inflation due to major challenges in the macro economy. The Indian economy has grown by 6.5% in the year 2011-12, after having grown at rate of 8.5% in the preceding year. The Industrial growth has slowed down due to rising interest rates, tight liquidity, inability to raise equity due to uncertain capital market, slowing down of foreign investments and above all, the lack of policy actions and reforms by the Government. This has adversely impacted the confidence of the industry and slowed investments, mainly in infrastructure and capital goods sectors. Global Scenario The global economic recovery is slowing and the global environment continues to be a cause for concern and caution. The global economic environment, which has been tenuous throughout the year, turned sharply adverse in September 2011 owing to turmoil in the Eurozone, and questions about the outlook of the U.S. economy. POWER SECTOR Currently, India has the fifth largest electrical system in the world; with installed electricity capacity of around 180 GW, of which 22 GW, i.e., 12.2 % is from Renewable Energy sources. The captive generating capacity connected to grid is about 19.5 GW. There is a huge gap between demand and supply with the all-India peak demand deficit of ~12%. As per industry estimates the current and approved electricity capacity addition projects in India are expected to add about 80 GW of installed capacity in the 12th five year plan beginning April 2012 with planned investment requirement of approx. $ 322 billion. This growth makes India one of the fastest growing markets for electricity infrastructure equipment. However, uncertainties in regulatory environment over coal linkages, land acquisition, environmental clearance etc., have majorly impacted the new investments and may also further delay the execution of projects which are underway. Under these circumstances, for meeting the industrial power demand, distributed power generation and captive power plants continue to play a crucial role. RENEWABLE ENERGY Since 2005, the energy and climate change agenda has taken centre stage in domestic and international policy. In addition, the renewable energy generation capacity has nearly tripled in the last five years. India's vast untapped renewable energy sources can pave the way for a secure, more affordable and environmentally sustainable energy future for the country. Assuming that the electricity power generation from renewable sources like wind and solar power is going to be substantial; it would be essential to add renewable power generation capacities through Municipal Solid Waste, Biomass and Waste heat recovery as they have good control capability with the change of power output. This will help in maintaining stable operations in the electrical system and absorb the fluctuation of reactive and active power. Biomass India is rich in biomass which has the potential of generating 16,881 MW from agro-residues and plantations, 5000 - 7000 MW from bagasse co- generation and approx. 2700 MW energy recovery from waste. Biomass power generation in India is an industry that attracts investments of over Rs. 6 billion every year, generating more than 5000 million units of electricity and yearly employment of more than 10 million man-days in the rural areas. The Government has launched National Action Plan on Climate Change in June 2008 to promote the use of renewable energy for power generation. Taking cue from this, Ministry of New & Renewable Energy (MNRE) has planned to initiate 'National Bioenergy Mission' in association with State governments, Public & Private sectors and other stakeholders to promote ecologically sustainable development of Bioenergy to address country's energy security challenge. MNRE is targeting for the deployment of 20,000 MW of biomass power by 2022. Geothermal and Concentrated Solar Energy Geothermal and Solar Energy resources can be used for a wide range of power and heat applications. India's installed geothermal energy capacity is currently experimental and the commercial use is insignificant. India has potential resources to harvest geothermal energy and has identified six promising geothermal regions for the development of geothermal energy. Similarly, though more advanced than Geothermal Energy development, Concentrated Solar power generation has received a big boost by the launch of the Jawaharlal Nehru National Solar Mission under the National Action Plan on Climate Change. India is bestowed with solar irradiation ranging from 4 to 7 kWh/ square meter/day across the country, with western and southern regions having higher solar incidence. Under this initiative, India plans to generate 1 GW of power by 2013. By 2020, 20 million square meters will be covered by solar energy collectors to generate 20 GW grid based solar power and 2 GW of off-grid solar power. Combined Heat and Power (CHP) This refers to the simultaneous generation of useful heat and power. In combined heat and power, some or all of the waste heat released into the atmosphere is captured, transformed into useful heat by deploying it in process applications or indirectly in producing steam, hot water etc. An optimal CHP system is designed to meet the thermal demand of the energy user-whether at industrial, individual building or city-wide levels. By using the heat output from the electricity production for heating or industrial applications, CHP plants generally convert 70-75% of the fuel source into useful energy. Waste - to - Energy The economic case for burning waste to generate energy becomes stronger as the size of waste accumulations expands and presents an environmental and management challenge. According to the estimates, the waste generated in India is over 50 million tonnes annually. The waste-to-energy industry is expected to benefit from the emerging opportunities in regions such as India, China, Europe and the US. Asia- Pacific region is expected to surpass Western Europe and emerge as the largest market in terms of waste-to-energy investments. Captive Power Generation The industrial sector is the largest consumer of electrical energy in India with many industrial establishments also owning Captive Power Plants (CPP). The CPPs also supply the surplus power generated to the grid. CPPs are developed to cater to the industrial demand where (a) the electricity supplied by the utilities is short in supply or (b) the grid supply is poor in quality & reliability and (c) the tariffs are high inter-alia due to heavy cross subsidisation. It is estimated that 30% of the total energy requirement of the Indian industry is currently met through in-house power plants. The opportunities emerged after the enforcement of the Electricity Act-2003 in the form of de-licensing of generation, implementation of open access and setting up of common trading platform, has made the captive power plants an attractive option for industries to meet their in-house requirement and to maximise their profits from sale of surplus power. Across industries, there is significant variation in captive capacity utilisation. Metals, Heavy engineering, Chemicals, Petroleum, Paper, and Cement industries account for 70 per cent of the total captive capacity and 85 per cent of the generation. Captive plants over the years have evolved from the plants owned by single promoters to group captive serving as a medium for maximising the benefit by selling its surplus power. Selling the surplus power through the power exchanges, claiming the incentives under Clean Development Mechanism (CDM) depending upon the technology used, earning energy efficiency certificates, Renewable Energy Certificates are other benefits associated with CPPs. Moreover, industrial and commercial growth would continue to impact the overall peak demand, which creates an opportunity for the merchant and captive power producers. Captive plants can contribute to greater economic gains. India's concern of electricity shortages could partly be addressed by better coordination of such industrial power surpluses. The captive plants, whether grid-connected or stand-alone, could contribute towards greater availability of power in the system by increasing consumption from captive generation and drawing less from the grid. Captive power plants have been growing at a fairly aggressive pace in India. BUSINESS OUTLOOK Financial year 2011-12 has been a challenging year for Triveni Turbine Limited (TTL), in terms of maintaining revenues and healthy margins due to intense competition and decline in the overall domestic market demand. In the sub 30 MW range, from an average annual demand of approx. 1700 MW during 2007-11 and as against 1425 MW in financial year 2010-11, the demand declined to about 800 MW in financial year 2011-12. Metal & Sugar Co- generation (SCG) segment recorded a major drop of over 50% while the decline in the industries in the Process Co-Generation (PCG) segment such as Food/Paper/Pharma sector was over 30%. Independent Power Producers (IPP) was the only segment which could sustain its demand in comparison to the previous year. Comparison of market demand for various segments in financial year 2010-11, financial year 2011-12 and the annual average for financial years 2007-11 is depicted. Even in this sluggish market environment, the Company could achieve reasonable order-intake with 54% market share. The Company has an outstanding order book, excluding the slow moving orders, of Rs. 4.95 billion as on March 31, 2012. This order book is executable in financial year 2012-13. MARKETING Domestic The Company has a dominant share in SCG/IPP/PCG segment and looks forward to gain prominent market share in Metal segment also. Despite the slowdown in domestic market in terms of order booking, the overall enquiry base for financial year 2011-12 has been similar to that of financial year 2010-11. Financial year 2011-12 witnessed major order booking in the domestic market from the metal processing industry with an extended scope of supply. Exports With the order finalisation in the domestic market turning slow due to macro economic factors such as liquidity, higher financing cost etc., the Company, during the year under review, went aggressive in expanding its footprint in the international market. Its foray into newer markets resulted in expanding its year-on-year order booking by 39%. The Company received break-through orders from municipal solid waste to power and waste heat recovery based power generating facilities in Europe. The Company consolidated its presence with orders from Sugar based waste heat recovery power plant, palm oil segment etc. The exports turnover grew by 32.2% over the previous year and is currently at 13.9% of the total sales. AFTER MARKET SERVICES The Company operates in the full band of aftermarket services, which include Erection & Commissioning, Spare parts, Refurbishment and Operation and Maintenance. The Company could maintain a reasonable growth even in this difficult market conditions. In the services business, customers become more cost conscious in difficult business situations and hence, prefer cost effective solutions to the fresh capital expenditure plans. The Company was able to maintain its market share in spares and there has been significant improvements in the business of refurbishment. A number of new categories of jobs have been completed with successful foray in the Utility range. During the year, the Company refurbished large sized utility turbines enabling prequalification in this segment, thereby creating good business prospects for the future. The overall business of aftermarket grew by 7.8 % over the previous year and is currently at 16.8% of the total sales. MANUFACTURING FACILITY TTL's state of the art manufacturing facility is fully equipped to manufacture industrial steam turbines. It is equipped with an array of 4 axis and 5 axis Vertical Machining Centres and Horizontal Machining Centres for blades, Mill-turn centre for rotors, CNC gantry and CNC VTL for casing machining to high accuracies. It has fully equipped assembly-cum-test beds for assembling the turbines from start to finish and recording the test results on a wireless Data Acquisition and Display System. The facility also boasts of High Speed Vacuum Balancing Machine for balancing rotors, CNC Coordinate Measurement Machine, DG Sets for 100% power back up, EOT cranes etc. The manufacturing facility is located in green employee friendly surroundings. The manufacturing facility is certified for both ISO 9001 QMS & ISO 14001 EMS standards and is always ready to cater to diverse customer needs in turbine business. SUPPLY CHAIN Suppliers are key to our business performance and they are treated as our extended business partners. The Company establishes long term business relationship by entering into Partnership Agreements with critical suppliers. Well defined quality and delivery parameters along with transparent pricing mechanism helps to further business dealings with the supply chain partners. The Company follows a global procurement policy to continually optimise the cost and mitigate purchase price risks. Product standardisation by Value Engineering to reduce cost / lead time of product realisation is followed. Sharing of knowledge and experience with suppliers is an ongoing process. The Company is able to offer better deliveries than its peers due to strong supply chain relationship. The key to this performance has been seamless communication of its manufacturing plans, expected order flows and volumes to the critical suppliers of long lead items. The Company could mitigate the increase in input cost of castings, forgings as well as piping materials by prior planning its procurement through long term contracts. Whilst the industry expects a rise in input cost on castings commensurate with increase in the scrap prices and due to significant contraction in capacity due to the power shortage in some parts of India, the Company has put risk mitigation measures in place by developing alternative cost effective sources and building lower costs through value engineering. QUALITY ASSURANCE The strength in the Company's products lies in the fact that they comply to various product standards such as API, ASME, AGMA, NEMA, IEC etc. The Company has a network of approved suppliers and dedicated sub contractors complying with stringent quality norms through QAPs to maintain comprehensive quality control of turbine and its auxiliary systems. TTL ensures CE/PED Mark Quality Certification to its product as per European norms. The Company also deploys new tools and techniques like Visual Management system (SQDCM), DMAIC methodology, Kaizen, QIP, Small Group Activities, Daily Work Management, CCRS and Root Cause Analysis in order to provide its customers reliable and high performing turbine solutions. In 2010, TTL introduced the 'Kaizen' movement in order to create and bring culture of continuous innovation & improvements throughout the organisation. The results are immediate, significant and satisfying in productivity improvement, quality, cost and safety improvements by eliminating waste and improving processes. TTL team bagged second place in 'National Level Kaizen Competition' under operator category. TTL has progressed significantly in its journey towards Business Excellence in 2011. The Company has been awarded with 2nd level recognition 'Commendation Certificate for Significant Achievement' by CII-EXIM bank Award for Business Excellence. This award is based on Excellence Model of European Foundation of Quality Management (EFQM) and the award process is administrated by CII in India. TECHNOLOGY Continuous product development is one of the key requirements for the business to maintain its competitiveness. During the year, the Company developed 12 new product variants to serve the application requirements of the customers as well as for continual efficiency improvement. One of the objectives was to keep track of new technologies and tune it with the new age auxiliary equipment, thereby adding value to our customers, through reduction in initial capital as well as the operating expenses of the project. The key development highlights are the design of air cooled condensing turbines, new blade designs for high volumetric flow, high efficiency blade path using advanced reaction stages, high back pressure designs for Oil and Gas etc. The Company also developed around 8 new basic models during the year. INTELLECTUAL PROPERTY RIGHTS Steam Turbine is highly technology oriented business, hence, the protection of Intellectual Property (IP) is one of the critical requirements in the long term sustainability of the business. The Company ensures involvement of IP team right from product conceptualisation stage to the final design stage. Stage gate processes are being implemented and complete technology scanning of all the R&D Projects is being done by IP team. A comprehensive security system has been put in place to safeguard valuable IPRs developed by the Company. Various regulatory requirements have been completed with respect to design registrations in India and Europe - consequently, 11 design registrations in India and 7 European Community Designs have been granted and stand valid to the credit of the Company. In the U.S., 3 Design Patents have been filed and the Company is in the process of filing patents in South East Asian countries as well. The Company also intends to file Patents Co-operation Treaty (PCT) applications which will be binding for all the member countries to this treaty. HUMAN RESOURCE As our business focuses on customised engineered-to-order mechanical equipment, skilled manpower is one of the key success factors. The Company has strengthened its critical functions of R&D, Engineering & Projects department in a challenging year for talent acquisition. This support has provided required vigour across the organisation in meeting the set goals. The Company implemented Appreciation-Recognition-Celebration policy during the year with a view to develop personal bonding with its employees. Appropriate measures and enablers were implemented to retain good talent in the critical departments and it has yielded the desired results in maintaining trained human resource towards building a world class organisation. The overall attrition in the Company has been generally the lowest compared to the engineering industry. With a view to penetrate overseas markets comprehensively and effectively, the Company has started recruiting local experts and professionals to begin with in South East Asia, wherein the Company intends to have major presence. LEARNING CENTRE The Learning Centre of the Company is the fulcrum for all the technical training needs of its engineers. During the year, the emphasis was on imparting technical training to TTL engineers and workmen, on the product. The Learning Centre had conducted training for around 12 man days per employee. Graduate Engineer Trainees & Diploma Engineering Trainees were imparted with complete training from basic engineering concepts, product inputs and field exposure. Training programme on the product was imparted to engineers from customer-end and to suppliers for improving their efficiency and operation and maintenance. Learning centre in co-ordination with supply chain called upon domestic & international Suppliers of Balance of Plant (BOP) equipment to train engineers of TTL on updates of technologies and its benefits. Computer Based Product Training (CBT) was developed by Learning Centre and this platform is used by all the engineers (Fresh and lateral entry) to update them on TTL product range and features. As a continuous improvement, up- gradation of the learning module is under progress. Learning Centre is in the process of building the repository of knowledge management on the existing product range and on the new developments in tandem with R&D and engineering. It is on track to build a technical library and create a platform of learning to all the engineers / technical fraternity. This is congruous to the Company's goal to serve its customer better and to make technology and service as a differentiator. GE TRIVENI LIMITED (GETL) The joint venture with General Electric, established in financial year 2010-11, is progressing well on technology transfer, marketing and project execution plan. Financial year 2011-12 was a challenging year for GETL with respect to declining market, both domestically and internationally. It could make its presence felt by attracting enquires in large numbers both in India & world market. Initial marketing efforts by TTL in the domestic market have yielded in getting the first order for GETL product range. With the experience, marketing thrust and field reference, further booking of orders is expected. The entire manufacturing of GETL products will be undertaken at the manufacturing facility of TTL. OUTLOOK Despite the uncertain economic scenario, worldwide power generation sector is bracing for a long term growth, driven by the presence of strong demand drivers including increasing population and improving consumer lifestyles, rapid industrialisation in emerging economies, particularly China and India. Clean energy, environmental constraints, rising cost of fuel and energy policies will play a significant role in changing the dynamics of the thermal power industry and determining technology mix. Asia-Pacific represents the largest regional market. The region forecasts to record the fastest growth in electricity generation because of increasing efforts to enhance the electrification rates. Efforts of major markets in Latin America to diversify their fuel sources, which rely heavily on hydropower, are expected to increase preference for thermal power generation and other renewable sources of energy. The installed capacity for thermal energy in the Asia-Pacific region for 2011 is estimated at 1372.5 GW. The installed capacity is expected to grow at a CAGR of 6.8% for the period 2012 - 2020, with the total installed capacity expected to be around 1969.3 GW in 2020. In the recent years, the financial crisis lowered investor confidence and significantly raised the cost of capital. The underdeveloped and developing economies face the challenge of power evacuation in tandem with generation. Hence within the domain of Thermal Power Generation, the discrete Renewable energy based power generation will contribute significantly in remote areas through distributed and decentralised power generation. Increasing consciousness about offsetting the environmental impact of fossil fuels has prompted the European Commission to plan for collective energy policies and promote energy efficiency directives. Stable energy prices make it a right energy investment decisions, and a sound strategy to rebuild a co-generation base. Co-generation is all set for a revival in Europe between 2014 and 2018. Most countries across Europe are expected to increase their co-generation capacity, mainly in the combined cycle form. Under the combined heat and power (CHP) directive, Germany, Italy and Spain have made considerable strides in building a policy framework to support co-generation, while Germany has set itself a target to double co- generation capacity by 2020. In 2011, the EU identified co-generation as the energy application that can make the single-largest contribution to achieving the region's greenhouse gas reductions, giving a huge thrust to the market. The effective implementation of CHP policies and a focus on creating favourable conditions for co-generation development are likely to drive the market in Europe. Exports will be a major growth driver for the business in the coming years. Currently the Company has presence in 30 countries, with focus on South East Asia markets of Indonesia, Malaysia and Thailand, Korea, Europe. The Company will be developing new geographies like South America, Middle East and Africa in near future. Going international entails serving new market segments like Geothermal, Solar Thermal Power and a broader ambit of biomass technologies. The Company is geared up with appropriate product and service offerings for most of the power generation technologies being deployed. The strategy has been to leverage the huge installed base of the conventional renewable energy primarily in the Sugar Bagasse power generation in India and developing new models for the specific applications dominant in focused geographies. During the last two years, the Company has focused and successfully developed the European markets for waste heat recovery and district heating segments. This will provide the requisite testimony for the Company for further business. The Company will explore deeper into the developed markets for its products and services and will explore opportunities in various new segments. The Company will have an aggressive approach in market development creating local set up to go closer to the customer and serve them better, going forward. Initiating steps to create a global sales organisation has been a key activity in financial year 2011- 12. With the government thrust being shifted to revive the growth, the investor confidence and capex cycle may pick up momentum by second half of the financial year 2012-13. As a natural hedge, the Company will focus more on the international markets and will be aggressive in the service business. The Company has significant capability for the refurbishment business considering its collective turbine engineering experience, supported by state-of-the-art High Speed Dynamic Balancing facility, R&D capability, reverse engineering tools and competence. Servicing is another growth driver for the Company. The Company will leverage its strength of huge knowledge base on steam turbines and high speed turbo-machinery acquired over a period of time to get more business on refurbishment. Overall, the outlook on the business seems promising for financial year 2012-13 and the Company expects reasonable growth prospects by penetrating deeper in the existing markets and exploring new markets and geographies. CORPORATE SOCIAL RESPONSIBILITY The Company is committed to create an environment that contributes to communities and the conservation of nature, provide quality education to the underprivileged sections of society and encourage employees to participate in the various social initiatives of the Company. Deriving the inspiration from its basic philosophy of a responsible corporate citizen, the Company pursued projects in the areas of education and health. Under its education initiative, the Company aims at providing educational aides for student development, and other necessary support for the students of under privileged community. The Company facilitates this objective by working closely and assisting organisations which are into community welfare, by providing direct support like assets, resources, educational aides to students or indirectly through financial assistance. Following these principles of the CSR activities, the Company had contributed towards education expenses of 83 differently abled students. The Company donated to Aruna Chetana and Dharithree-Ajitha Chetana which covered the honorarium to staff, conveyance, nutritious drink to the children, equipments for special teaching aids therapy etc. The Company donated furniture to Prerana Resource Centre, a hostel for 120 physically challenged girls. The Company had donated to Akshaya Patra for A Mid-Day Meal Scheme. This takes care of the cost of mid-day meal for underprivileged students during the year studying in government schools. The Company distributed school bags, note books and other accessories to all the students (from Pre-Nursery to 7th Standard) of the Government Model Primary School, Peenya. TTL provided financial assistance to Maria Seva Sangha, an NGO which takes care of the basic needs of poor and aged people. The Company hired an experienced trainer from M/s. People-Pro to train around 200 secondary school students at Government Model Primary School, Peenya on traits like communication, personal hygiene and personality development. 30 employees volunteered in the Big Buddy Initiative. These employees visited the School every week to help students excel in academics and helping them in development of their soft skills. The Company also provided a colour printer to the Government Model Primary School, Peenya. TTL organised a Blood Donation Camp in the Company campus wherein around 200 units of blood was donated. On the World Environment Day, around 500 saplings were distributed to the employees for planting them around their residences. FINANCIAL REVIEW Financial year 2011-12 is the first full year of turbine operations of the Company post the demerger. The summarised results for financial year 2011- 12 and financial year 2010-11 are provided here. The performance results for the financial year 2011-12 are not comparable with the financial year 2010-11 as the previous year's figures include turbine operations for six months only. (Rs. in million) Description 2011-12 2010-11 Annuallsed Change % Net Turnover 6318.8 3050.5 3.6 EBITDA 1561.2 717.1 8.9 Depreciation & Amortisation 115.9 58.8 -1.4 Finance Cost 95.9 47.1 1.8 Profit Before Exceptional/ 1349.4 611.2 10.4 Non recurring items & Tax Extraordinary Charge - 559.8 Profit Before Tax 1349.4 51.4 Tax 438.6 124.0 Profit After Tax 910.8 -72.6 The Company's strategy to focus on exports to achieve geographical diversification of its products has paid dividends -the exports at Rs. 880.5 million were 13.9 % of the total revenues as against 10.9 % in April - March 2011. This strategy will provide effective insulation from the slow-down of the domestic market due to macro economic factors. Likewise, the revenues from after-market operations at Rs. 1058.6 million account for 16.8 % of the total revenues as against 16.0 % in April - March 2011. Despite the challenging market conditions, the Company has been able to preserve the margins due to cost optimisation and higher proportion of high-margin exports and after-market spares and service. The extraordinary charge in the previous year relates to writing-off of the goodwill recognised pursuant to the Scheme of Arrangement (the Scheme). Due to profitable operations, the Company has been able to absorb accumulated losses of Rs. 330.53 million carried forward from the last year which were mainly on account of the extraordinary charge as aforesaid. Raw Material And Manufacturing Expenses (Rs. in million) Description 2011-12 2010-11 Annuallsed Change % Raw material (net of increase/ 3827.6 1883.0 1.6 decrease in WIP and finished goods) Percentage to sales 60.6% 61.7% Manufacturing expenses 155.3 87.9 -11.7 Percentage to sales 2.5% 2.9% * includes turbine operations for a period of six months from October 1, 2010 till March 31, 2011. The material cost as a percentage to sales is lower by 110 basis points after offsetting inflationary trends due to higher proportion of high- margin turbine exports and after-market revenues. The manufacturing expenses mainly comprise of tools consumed and power & fuel cost, which were kept under control, despite increase in fuel prices, due to rationalsation of production process. Personnel Cost, Administration Expenses And Depreciation (Rs. in million) Description 2011-12 2010-11 Annuallsed Change % Personnel cost 461.0 195.4 18.0 Percentage to sales 7.3% 6.4% Administration 283.5 138.4 2.4 Percentage to sales 4.5% 4.5% Depreciation & Amortisation 115.9 58.8 -1.4 Percentage to sales 1.8% 1.9% * includes turbine operations for a period of six months from October 1, 2010 till March 31, 2011. Personnel Cost There is no significant increase in the head count. The increase in personnel cost as a percentage of net turnover is due to annual increments granted. Administration Expenses The administration expenses as a percentage of turnover is almost at the level as that of the previous year. This has been in line with the Company's overall cost control plan. Depreciation and Amortisation The depreciation of fixed assets and amortisation of intangible assets take into account the capital additions during the year. BALANCE SHEET Share Capital In accordance with the sanctioned Scheme of Arrangement, the Board of Directors of the Company during the year had issued and allotted 2,800,000 - 8% Cumulative Preference Shares of Rs. 10/- each fully paid up to Triveni Engineering and Industries Ltd. (TEIL) and 257,880,150 Equity Shares of each fully paid up to the Equity Shareholders of TEIL. Consequently, the Share Capital Suspense Accounts as appearing on March 31, 2011 have been regularised. Reserves and Surplus As against accumulated losses of Rs. 330.5 million as on March 31, 2011, there is a surplus of Rs. 178.5 million after meeting dividend payments of Rs. 251.8 million (including dividend distribution tax) and after transferring an amount of Rs. 150 million to the General Reserve. Loans The total loans aggregate to Rs. 363.2 million as on March 31, 2012 as against Rs. 875.5 million as on March 31, 2011. The break-up of the loans is as follows. (Rs. in million) Description March 31, 2012 March 31, 2011 Term loans 353.8 581.5 Cash Credit 4.5 35.2 Vehicle loans 4.9 0.0 Unsecured loans - Buyers credit 0.0 90.0 - TEIL 168.8 Total 363.2 875.5 Break-up -Long term borrowings 167.0 462.2 -Short term borrowings 4.5 125.2 -Other current Liabilities 191.7 288.1 During the year, term loans of Rs. 227.7 million have been repaid and the instalments due for repayment in financial year 2012-13 aggregate to Rs. 191.7 million. The prepayment of loans will be considered in financial year 2012-13 subject to economics of the applicable prepayment premium. Investments During the year, the Company has subscribed to the equity share capital of its subsidiary, GE Triveni Ltd., to the extent of Rs. 45 million and the non-current trade investments correspondingly increased to Rs. 55 million. Current investments of Rs. 100 million represent surplus funds parked in the liquid mutual funds. Working Capital The Company's business normally operates with negative or minimal working capital. The negative working capital at the year-end stands at Rs. 374 million. Cash & cash equivalents of Rs.118.1 million represent fixed deposits of Rs.100 million with banks having maturities less than 3 months. BUSINESS RISKS AND MITIGATION The Company's business relating to steam turbines falls under capital goods industry which is closely linked with the country's economic activities. Further, domestic sales form a considerable part of its total sales. Apart from the economic growth, the Company is subject to various other business risks. Each of the major risks and the risk mitigation followed by the Company are described here under: Economic Slow-down The slowdown in the economy of the country directly impacts the demand of the capital goods / infrastructure requirements, which in turn impacts the growth of the Company. While this risk is beyond the direct control of the Company, under such difficult conditions, the Company endeavours to mitigate the risks by focusing on high-margin after-market revenues, value engineering and exploring other growing markets to preserve its turnover and profitability. The Company has been focusing on new export markets to enlarge its geographical reach. The strategy results in having multiple streams of revenue to reduce dependence on any one market/sector. Rising Interest Rates The rising inflation and cost of capital increase the business risk of the project developer, thereby reducing the demand for the capital goods. However, the Company deals in and supplies its turbines in sub 30MW where the project cost is not high and most of these projects have low pay-back period. Under challenging times, the customers in fact opt to implement the project at the earliest to achieve cost optimisation and profitability improvement. Technology Risk The Company operates in engineered-to-order capital goods industry, wherein product efficiency and critical product features play an important role in determining the overall life cycle costs. The Company mitigates the technology risk by vigilantly studying and forecasting the trend of the customer preference and accordingly, plans its R&D activities. The Company has a vibrant R&D department which undertakes product development and improvements within the shortest possible lead time and at optimal costs. The Company's emphasis to subject its engineers continually to technical training in its in-house learning centre paves the way for building pipeline of talent in this discipline. Further, the Company also has strong tie-ups for R&D with international design houses and local research institutions. The Company has an impressive track record of developing new models and higher range of turbines which have been well received in the market. Competition Risk The Company faces competition from the steam turbine manufacturers of international repute in the domestic and international market. This may compel the Company to quote aggressively impacting its margins. With a view to mitigate these risks, the Company endeavours to provide a value proposition to the customer offering products meeting the benchmark efficiencies at competitive prices and shorter delivery period without compromising on its margins. Further, the products are backed by impeccable service. The products of the Company command enormous goodwill and numerous repeat orders are testament to the quality of its products and the confidence reposed by the customers. Availability of Capital The non-availability and high cost of capital may affect the growth plans of the Company. The business model of the Company is technology intensive and not capital intensive with a well developed supply chain. Further, the business operates with minimal, and most of the times with negative working capital. The Company is almost debt free and the free cash flow generation is substantial which is considered adequate to meet its capital expenditure even after distribution of dividend to the shareholders. The Company, even in its initial period of turbine operations, has investment grade external rating which will help it to raise funds at remunerative rates, if required.

TRIVENI TURBINE LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS INDIAN POWER SECTOR: Power, as a critical resource, would play a vital role in sustaining and furthering India's economic growth. In order to achieve a consistent 9% growth in the GDP, India will need around 331GW of total installed capacity by 2016-17, according to the Economic Survey 2010-11. Historically, the Indian power sector has witnessed an increasing gap between demand and supply. Rapid urbanisation and industrialisation is resulting into rising demand for electricity. Installed power generation capacity in the country was 174 GW, as at the end of April, 2011. Out of this, the capacity to generate power by using renewable energy sources was 18.4 GW. Distributed Energy Generation In order to reduce the country's dependence on conventional thermal power and harness India's underlying potential in renewable energy, the Government of India has been promoting clean and green power amongst other forms of distributed power generation. In the 2011 Union Budget, the Government of India has launched the Mission of '10 year Green India' with the allotment of dedicated funds from its budget for National Clean Energy initiative. The Electricity Act (2003) and the resultant functional open-access policy has enabled captive power generating units to supply surplus power to the grid. The catalyst for this policy has been the consistent delay and shortfall in planned power- generation capacity addition. The delays have primarily come from mega and ultra-mega power plants as well as from hydro plants. The reasons are many: acquisition of land, environmental clearances, water availability, availability of coal, non-availability of adequate debt and equity funding. These are issues that smaller power generating plants do not face, and therefore such distributed power generation through captive power plants (CPPs) and renewable source based Independent Power Projects (IPPs) are increasingly becoming a focus area for power augmentation. Biomass based Power Generation In the Indian context, biomass fuel plays a crucial role in renewable energy generation. As per the Ministry of New & Renewable Energy (MNRE) statistics, as at the end of March 2011, the estimated potential for power generation through bagasse and other agro residues is approximately 21.8 GW, while the actual achievement till date is only 2.6 GW. The Government is providing various incentives for biomass power generation through a slew of measures like Exemption/Reduction in Customs Duty, Excise Duty, Sales Tax etc., besides allowing accelerated depreciation and an income tax holiday. The business proposition of establishing biomass power plants gets further strengthened by potential tradable carbon offset credits, in the form of Renewable Energy Credits in India and Certified Emission Reduction credits under the Kyoto Protocol. As per an industry research firm, it is estimated that power generation by using all forms of biomass including industrial and urban waste will reach 42 GW by 2020. It is also estimated that Indian sugar mills have the potential of generating an additional 5 to 7 GW of power through bagasse if the sugar mills adopt technically and economically optimal levels of co- generation for extracting power from the bagasse produced by them. Apart from grid-interactive power applications, Indian renewable energy sector also caters to off-grid applications. It does so by providing energy access through decentralised generation using locally available biomass and by meeting the process heat as well power requirements of large number of small and medium enterprises. Captive power investments help business entities in reducing the opportunity cost of production loss resulting from unreliable and inadequate grid power. MNRE is giving an increased importance to deployment of off-grid, distributed and decentralised systems. Captive Power Generation Captive power refers to generation of electricity for captive consumption, primarily by industries. Industries, in India, are one of the largest users of electrical energy, accounting for close to a half of country's total electricity consumption. Multiple factors lead to the setting up of captive power plants (CPPs). Non-availability and lack of reliable supplies from the grid has forced many industries to set up their own captive generation unit, while the lower cost of generation vis-a-vis the cost of power from the grid has also prompted many industries to self-generate, especially when process steam or heat is either needed or produced as part of the industrial process. This economic rationale usually encourages CPPs to supply surplus generation to either the grid or to merchant power traders. There has been an increasing trend in the proportion of exportable surplus of installed CPP capacity, suggesting an opportunistic motivation of entrepreneurs to capitalise on high merchant power tariffs. According to a report on captive power in India, the total installed captive power capacity in India is estimated at 58.6 GW which is expected to rise by about 12 GW in the next three years. While 70% of the CPPs are small-sized with capacities below 10 MW, only 2.4% of the total capacity is in the above 100 MW range. Power-intensive sectors, such as metals and minerals (steel, aluminium, zinc, copper), account for almost one-third of the total installed capacity. Some of the major sectors with captive power generation are: Sectors Total capacity power Metals & minerals 12,991 Cement 4,768 Chemicals 4,291 Petrochemicals 3,668 Textiles 3,476 Engineering 3,115 Sugar 2,950 Paper 1,403 Global Small Power Generation Potential: It is projected that worldwide industrial energy consumption, which constitutes 50% of the total delivered energy today, will grow from 184 quadrillion BTU in 2007 to 262 quadrillion BTU in 2035. Biomass for heat and power production currently provides the vast majority of renewable energy, consumed in the industrial sector and it is expected to remain one of the largest components of the industrial sector's renewable energy mix for the projection period. With a focus on clean energy, Governments across the globe are implementing promotional policies for attracting investments in the renewable energy sector. Most of the countries have adopted more than one promotional policy, and there is huge diversity in policies in place at national, state/provincial, and local levels. Biomass and geo-thermal heating markets within the renewable energy sector are expanding steadily, particularly in the western countries. Biomass power plants exist in over 50 countries around the world and supply a growing share of electricity. The latest trends include use of biomass in building-scale or community-scale combined-heat and power plants (CHP), and use of biomass for centralised district heating systems. Several European countries are expanding their total share of power generation from biomass than oil. The use of biomass for district heating and CHP provides about 67% of all biomass heat sold in Europe. Among developing countries, it is common to produce small-scale power and heat from agricultural waste such as rice or coconut husks. The use of bagasse for power and heat production is significant in countries that have a large base of sugar industry, such as Argentina, Australia, Brazil, Cuba, India, Philippines and Thailand. COMPANY'S BUSINESS PROFILE Consequent to the Sanction of Scheme of Arrangement between Triveni Engineering & Industries Limited (TEIL), Triveni Turbine Limited (TTL) and their respective shareholders and creditors, the steam turbine business of TEIL was demerged into TTL (this Company) from the appointed date of 1st October 2010. The discussions herein also include the period during which the steam turbine business was a segment of TEIL. The main business of the Company is manufacturing and selling steam turbines in accordance with the customers' specifications. To support the steam turbines, it also manufactures and supplies spare parts and provides various turbine related services in respect of turbines manufactured by it as well as other makes. It strives to capture value in all activities incidental and related to turbines. TTL prides itself in providing a value proposition to the customers, having lasting mutually beneficial relations with them and rendering world-class services. It uses research and development and its state-of-the-art manufacturing facility to make its product comparable with the best in the industry. PRODUCT STREAMS: Steam turbines The Company manufactures engineered-to-order steam turbines upto 30 MW. With 40 years of experience and over 60% of market share, TTL has gained a global repute for its cost-effective, highly efficient and reliable products and solutions. The Company is the first steam turbine Company in India to be certified with ISO 9001 and ISO 14001 for its quality standards. The Company's world-class manufacturing facility has a capacity of manufacturing over 150 turbines per year which is under further expansion. It has installed over 2500 turbines in more than 30 countries. The Company designs, manufactures and delivers a wide range of customised Condensing and Back Pressure steam turbines up to 30 MW, at high pressure (110 at a steam pressure) and high temperature (540 deg. C superheat temperature). The Company ensures that every turbine it manufactures is engineered-to-order to suit customer's specifications. With continuous in- house research & development, the Company, during the past few years, have upgraded its turbines in terms of size (MW) as well as developed variants relating to various pressure and temperature limits to cater to wide range of customers. The steam turbines meet national and international benchmarks like IS, CE, API, IEC etc. and cater to a wide range of industries including biomass and municipal solid waste based Independent Power Plants (IPP), Captive Power Plants (CPPs) and Co-generation plants. Aftermarket Services The Company's focus on the after market services has proved to be a decisive differentiator from its competitors. The Company has been providing prompt, efficient and reliable services including a wide range of integrated offerings like refurbishing and operation & maintenance (O&M). Its aftermarket services are integrated under Customer Care Cell (CCC) which currently contributes to nearly 16% of its total revenues. The Company's strong and dedicated team of customer-care professionals provides solutions for all after-sales requirements from erection and commissioning (E&C) to maintenance and spare parts to efficiency improvement. It provides proactive solutions to ensure that turbine operates smoothly and effectively, fulfilling commitments and forging a lifelong relationship. CCC deploys 180 employees, which is almost one-third of the total employee strength of the Company, across 13 service centres in India and provides 24/7 customer service support in providing 99% up-time of turbo-generator island. Major activities undertaken by the CCC Erection & Commissioning The Company does the complete erection and commissioning for all the turbines sold by it and ensures that the turbine performs as per the requirements agreed with the customer through proper integration of the steam turbine island into customer's plant. Spares The Company, over a period of time, has created an effective system to support the spares requirement of the customers. It offers quick response in the delivery of spares and provides OEM support as well as continually works on value engineered parts to increase the efficiency and reliability of steam turbine. The quality parts are manufactured in-house, delivering performance. Services: CCC serves customers through a network of 13 service centres spread across the country. Even though the Company has to respond within 48 hours contractually, its service engineers report to the customer site within a maximum of 24 hours. The Company's services include overhauling services, troubleshooting and service contracts i.e. annual maintenance contracts (AMCs). Its service division helps customers in optimizing the performance as well as reducing their maintenance costs and downtime. All turbines which are installed overseas are also supported from India with a response time of 48 hours through a group of service engineers holding valid travel documents. Refurbishment The Company has developed in-house capabilities for refurbishment. It can provide complete steam turbine refurbishing solution of any make of turbine upto 200 MW including restoration/improvement, renovation, and re- engineering. The expertise has been developed in-house by teams of highly skilled engineers backed by product engineering, R&D, advanced technology and a high-tech facility to refurbish the turbines. The refurbishing services help the customers in attaining lower operating costs, extended turbine life and improved reliability besides offering economically viable alternate solutions. Operation & Maintenance The Company's operation and maintenance services help customers operate their power plant efficiently and reliably, by maximizing its output and minimizing downtime. O&M package includes optimum day-to-day plant management, optimum plant efficiency, reduction in the cost of man management, superior level of maintenance, local and remote monitoring and continuous onsite training programme. INDUSTRIES SERVED The Company provides steam turbine solutions to diverse industry segments in applications like co-generation/Combined Heat & Power (CHP), Captive Power Generation (CPP) and Independent Power (IPP) Generation. Company's steam turbines are used in a variety of industries such as Sugar, Steel, Biomass IPP, Pulp & Paper, Textiles, Chemical, Carbon Black, Municipal Solid Waste (MSW) IPP, Oil & Gas and Food Processing Industries. The dominant Industry segments are Process co-generation (Paper, Textiles, Solvent Oil and Chemical] and Sugar followed by Steel and IPPs. The Company has installed steam turbo-generators in Biomass IPPs in India, United Kingdom, Spain, South Africa, Thailand and Malaysia. The Company has delivered turbines for process co-generation industries such as pulp and paper industry, textile plants, chemical, food processing industries etc., that co-generate consistent and reliable power and heat. It has successfully installed turbines for municipal solid waste based IPPs in India and abroad. The Company has designed and delivered steam turbines for district heating projects in Europe through reputed EPC contractors. The Company has also designed and delivered steam turbo-generators complying with API specifications for the oil and gas industry segment. MANUFACTURING FACILITY The Company has a world-class manufacturing facility located in Bengaluru. The facility is equipped with the state-of-the-art high precision equipments to manufacture critical components in-house such as the turbine blade, rotor, casing etc, and also has assembly bays to assemble and test the turbines before it is despatched to the customers. The facility has 5-Axis CNC Machining Center for blade machining. For machining of the rotor shaft, it has a high precision 5-Axis CNC Mill Turn Center. For meeting quality parameters and also for undertaking refurbishment and re-engineering, it has the Zeiss Co-ordinate Measuring Machines (CMM) for precision measurements of critical components and Vacuum tunnel for high speed balancing of rotors with capabilities of over-speed testing. The turbine casing machining is undertaken using the most modern 5-face CNC Gantry Machine and every turbine shipped by the Company undergoes Mechanical Steam Run Test to ensure its mechanical integrity and safety. Apart from the above mentioned specialised machines, it has a fleet of 4- Axis CNC machines for blade machining, casing etc. Apart from the hardware, the facility also uses the latest software such as Integrated CAD/CAM for seamless manufacturing of turbine parts, computerised wireless Advanced Data Acquisition System (ADAS) for capturing mechanical run test data and automatic generation of test reports etc. The facility is equipped with material handling equipments for handling the heavy castings and forgings. With this infrastructure, the Company ensures faster delivery of quality turbines thereby making TTL a reliable name in the turbine industry. SUPPLY CHAIN Effective and efficient supply chain and project management enables the Company to keep its cost under control. A strong supply chain and project execution team are the key for efficient performance. It has the adequate volumes to access the global market for sourcing cost effective materials. Even though the Company uses its in-house manufacturing facility for all critical components and assembly and testing of the turbines, it has developed a strong, reliable and quality adhering sub-contracting network to support its operations. With an optimal usage of in-house manufacturing and sub-contracting, the Company is able to meet its delivery schedules while maintaining its cost leadership. QUALITY The Company is committed to provide products and services of consistent quality that exceed the expectation of domestic and international customers and achieve competitive edge. In order to ensure the delivery of quality turbine solutions to customers, the Company follows multiple stage quality check and adheres to contract specific quality requirements. The product strength lies in achieving relevant product standards such as API, ASME, AGMA, NEMA, IEC etc. To maintain full quality control, Company has a network of approved suppliers and dedicated sub-contractors complying with stringent quality norms. In day-to-day activities, Company employs tools and techniques such as Six-Sigma methodology, Kaizen, Small Group Activities, Daily Work Management and Root Cause Analysis, etc. in order to provide its customers with reliable and high performing turbine solutions. To create and bring culture of continuous improvements throughout the organisation, TTL has introduced 'Kaizen' scheme with proper reward and recognition covering small improvements in productivity, quality, cost and safety by eliminating waste and improving processes. This move has enabled setting and achieving ever higher standards through employee participation. The results are immediate, significant and satisfying. In 2011, TTL team has presented their Kaizen in 15Tn All India Kaizen Competition at Pune, organised by CII. TTL has demonstrated its presence as one of the successful organisations in India. TTL has been awarded 'Commendation for Strong Commitment to Excel' on Journey towards Business Excellence during the last three years of participation in CII Exim Bank Award and the scores granted are showing upward trend since 2008. CII-EXIM bank Award for Business Excellence is based on Excellence Model of European Foundation of Quality Management (EFQM) and the award process is administrated by CII in India. RESEARCH & DEVELOPMENT The Company embarked upon a focused Research & Development (R&D) programme nearly a decade ago. The R&D program has been led by Company's in-house design and development teams ably supported by consultants and domain experts. The main focus of the Company's R&D programme is to meet the emerging needs of customers. It also has association with leading academic institutions such as IIT Chennai and HSc, Bengaluru to strengthen its R&D programme. The Company's association with globally acclaimed turbo- machinery design houses based in United States of America helps in developing best-in-class products. This has resulted in the introduction of many new variants of high pressure and temperature applications, cost effective and highly efficient steam turbines which meet the market expectations. Over the past 10 years, the Company has developed and commercialised 22 basic new models. Company uses combination of impulse and reaction blade path to achieve optimised product parameters. The Company has invested in the state-of-the-art design tools and software and the in-house team is trained using these tools. Over these years of learning is helping the Company to design internally many variants and is currently using the external agencies for the validation and approval of such in-house developments. R&D team utilize the latest computer aided design and engineering software for Finite Element Analysis (FEA), Computational Fluid Dynamics (CFD), Aero and Thermal Design, Modeling, Rotor Dynamics and Lifeing analysis of turbo-machinery components. Various tools used in the process are turbo-machinery blade design and CFD tools (AGILE by Concept NREC, USA) and general purpose CFD tools CFX, FEA & Lifeing Analysis Tools (ANSYS, Hypermesh, BladePRO by Impact Technologies, USA), CAD modelling (PRO-E, AUTOCAD), lateral & torsional rotor dynamics software (CRISP, TORSION, ARMD, Dyrobes). To ensure the functionality, safety and reliability of the steam turbo-generator, R&D team uses high- tech testing facilities for validation for design like blade frequency test bed, Campbell analysis of blades, strain gauging, over-speed vacuum tunnel balancing machine, mechanical steam run test, high pressure seal testing, hydraulic simulation facility etc. The R&D team is also engaged in value engineering to bring down the cost of the product thereby making the product more competitive and profitable. There is continuous product improvement program which focuses on higher power density and reduction in the size of turbines. Various reliability and operation improvement features such as high automation levels, additional safety redundancy, high speed control system, quick start cycles etc. are incorporated in the products. Semi modular product design philosophy is employed which optimises product performance and cost due to standardisation. Focus is both on product value enhancement and product cost reduction so that value proposition to customer is continuously enhanced. Innovative product development concepts such as Design to cost, QFD, FMEA techniques, DOE techniques for robustness, cost/performance optimization are employed. TTL's R&D designs are getting patented and the in-house IPR team is getting all the processes and designs registered under various IPR tools within India & abroad. This will help in safeguarding TTL's in-house technology and get the competitive edge over the other OEMs. The Company has filed 11 (Nos.) patents and has registered 7 design patents out of 9 filed by it in India & EU countries. Totally there are 21 IP filings in India & EU and the Company shall shortly file the IPs in US too. The IP area covers various components enabling high efficiency energy conversion in the turbine and reliability improvement features. LEARNING CENTRE As the Company is expanding its products and servicing, it requires technical manpower to support its growth plan. The Company realised this well ahead of its competitors and has set up a world class Learning Centre for meeting the future requirement of skilled and trained manpower. The Company's training programme is focused on developing technical expertise in the areas of design, manufacture and servicing of steam turbines besides the managerial & leadership skills. Various specific and focused training modules have been designed for training graduate engineering trainees. Refresher courses and the job specific programmes are also organised at the centre for existing employees. Since its inception, 351 training sessions have been concluded covering 71 GETs/DETs and 513 experienced employees. During the year under review, 35 training sessions were held resulting in 1800 of man-hour training. PERFORMANCE ANALYSIS The performance analysis of the turbine business is for a period of six months, from the appointed date of demerger i.e., 1st October, 2010. During this period, the Company recorded an all-round growth, with enhanced performance across the parameters of sales, profitability and order booking. The Company continues to maintain its market share of over 60% in the steam turbines market upto 30 MW. It has established its dominance in the sub 20 MW with a market share of more than 75%, while the market share in the 20 to 30 MW segment has grown to about 35% in three years time. The current overall domestic market for steam turbines upto 30 MW range is estimated at about 2000 MW and is expected to grow at 10-15% in the foreseeable future. During the period, the net sales grew by 19.54% and profit before tax increased by 21.30% over the corresponding period of previous year (during which it was a division of TEIL). The order intake during the period totalled Rs. 2.71 billion, while the outstanding order book as on 31st March, 2011 stood at Rs.5.83 billion, representing 988 MW. It dispatched turbines aggregating to 427 MW during the six months period. The improved market conditions with increased demand and ensuing Capex programmes in various industrial sectors were the key drivers for sales and order booking during the year. Multiple orders were booked during the year for high temperature, high pressure turbines. The Company continued its thrust on exports and is on course to expand its overseas market in a big way. The Company's efforts in this direction will be augmented by opening off-shore marketing and servicing offices which will help it in being close to its customers and thereby understand their needs better and serve them well. The factors leading the growth in global market for steam turbines include the revival of industries in South East Asia, Biomass IPP growth driven by mandatory targets of EU nations for share of energy from non-renewable source, fuel shift i.e., oil to solid, and instances of some specific segments doing well. During the period, the revenue mix from domestic sales and exports were 89% and 11% respectively, which is an indication of improved global market conditions for the customers. Service remains the key differentiator for the Company in the industrial turbine segment. It continued to strengthen its work-force during the year. It also forayed into refurbishing in utility range. The share of after- sales component in the total sales has gone up to Rs.440.2 million during the period from Rs.410.0 million in the corresponding period of the previous year. The increasing share of after-sales component will enable the Company to sustain its profitability going forward. GE TRIVENI LIMITED (GETL] Triveni Engineering & Industries Limited (TEIL) formed a Joint Venture (JV) with an affiliate of GE for design, manufacture, supply, sell and service of advanced technology steam turbines in the above 30 to 100 MW for power generation applications in India and across the globe. The JV agreement was signed on 15th April 2010, while the JV became operational from 3rd November 2010 after obtaining all regulatory approvals etc. The JV Company, GE Triveni Ltd. (GETL), is headquartered in Bengaluru. Upon the demerger becoming effective, all agreements including the investment in GETL by TEIL has been novated to the Company (TTL) which holds 50% + one share in the equity share capital of GETL, with both parties having equal representation on the board. Consequently, GETL is a subsidiary of the Company. GETL will use GE technology and the manufacturing will be outsourced to the Company (TTL). The marketing for the JV will be undertaken by both partners with GE handling the international market and the TTL responsible for the domestic market. The market for these products is currently estimated at around US$ 2.5 billion globally, of which the Indian market is about US$ 300 million. GETL's operational activities have already started and key managerial personnel have been inducted. The strong enquiry book both in domestic and international markets has been encouraging and GETL has started quoting against these enquiries. GETL is expected to have domestic and international order-bookings in the next two quarters. The vision of both partners is to make GETL a global leader in above 30 to 100 MW segment. FINANCIAL REVIEW The Scheme of Arrangement (Scheme) between Triveni Engineering & Industries Ltd. (TEIL), Triveni Turbine Ltd. (TTL) and their respective shareholders and creditors was approved by the Hon'ble Allahabad High Court vide order dated 19th April 2011 and had become effective on 21st April 2011 upon filing of the order of the Hon'ble High Court with the Registrar of Companies. Pursuant to the Scheme, all the assets and liabilities of the steam turbine business of TEIL have been transferred to and vested in TTL from the appointed date of 1st October 2010. Accordingly, financials for the year ended 31st March 2011 include financial results of the steam turbine business for a period of six months from 1st October 2010 to 31st March 2011. In the previous financial year 2009-10, the Retail business, being carried on by the Company in semi urban/rural areas, was substantially wound up and the complete winding up has been achieved during the current financial year. Hence, the figures of the current financial year and the previous financial year are not comparable. With the complete winding-up of the Retail Business, all provisions/losses in respect thereof have been accounted for and henceforth the results of the Company will not be impacted in any manner by the erstwhile Retail business. Profitability Summarized results for the FY 2010-11 and 2009-10 are provided here: Rs. in Million 31st March 31st March 2011 2010 Net Turnover 3054.2 60.3 Operating Profit (EBITDA) 715.6 (53.3) Depreciation and Amortization 58.9 3.9 Finance Cost 45.6 0.1 Profit before Tax (PBT) before 611.1 (57.3) Extra ordinary/Exceptional Items Extraordinary/Exceptional Items 559.8 23.5 PBT after Extra ordinary/ 51.3 (80.8) Exceptional Items Tax 124.0 (4.9) Profit After Tax (72.7) (75.9) Pursuant to and arising from the Scheme, goodwill of Rs.559.8 million was recognized and accounted for and the entire amount has been written off during the year. This is a one-time non-cash charge and has been categorised as an Extraordinary Charge. After writing off the entire amount of goodwill and booking all losses/provisions relating to the erstwhile Retail business, the financial results for the subsequent years would only reflect the operations of the Turbine business. The segment reporting of the Company is provided in the Note No. 10 of Schedule 24 to the audited accounts and the summarised segment results are provided here: Rs. in Million 31st March 31st March 2011 2010 Steam Retail Total Steam Retail Total Turbine Turbine Segment Revenue 3153.8 2.6 3156.4 - 60.3 60.3 Other Income 23.8 1.9 25.7 - 6.2 6.2 Total Revenue 3177.6 4.5 3182.1 - 66.5 66.5 Segment Results 657.0 (1.5) 655.5 - (59.0) (59.0) The financial results of the steam turbine business are only for a period of six months from 1st October 2010. As may be observed, there have been minimal operations of Retail business during the current financial year and in view of the fact that the business has been duly exited, it will not appear as a reportable business segment from next year. Steam turbine business has achieved margins at 20.7% of its segmental revenue. BALANCE SHEET: Share Capital Prior to the Scheme becoming effective, the Company was a wholly owned subsidiary of TEIL. Pursuant to the Scheme, 257.88 million equity shares of Rs.1/- each fully paid up have been allotted to the equity shareholders of TEIL in the ratio of 1 (one) fully paid up equity share of Rs.1/-each of the Company for every 1 (one) equity share of Rs.1/- each fully paid up held by them in TEIL. Further, out of the paid up capital of 100 million equity shares of Rs.1/-each fully paid up of the Company entirely held by TEIL (prior to the Scheme), 28 million equity shares of Rs.1/-each stood converted into 2.8 million, 8% cumulative redeemable preference shares of Rs.10/- each. Consequently, the paid up share capital has increased from Rs. 100 million to Rs.357.9 million. Since the aforesaid change in share capital has taken place subsequent to 31st March 2011, after the approval of the Scheme, such shares have been shown in the suspense account in the audited financial statements. Loans The total loans aggregate to Rs.883.4 million as against Rs.175.4 million as on 31st March 2010. The breakup of the loans is provided here: Rs. in Million 31st March 31st March 2011 2010 Term loans 581.5 0.1 Cash Credit 35.2 - Unsecured loans - Buyers credit 90.0 - Unsecured loans - TEIL 176.7 175.3 Total 883.4 175.4 Pursuant to the Scheme, the allocation of term loans pertaining to steam turbine business has been carried out in accordance with the provisions of Section 2(19AA) of the Income Tax Act, 1961. Investments In accordance with the Scheme, investments made by TEIL in the equity share capital of its subsidiary Company, GE Triveni Turbine Ltd., (GETL), were transferred to TTL and hence, GETL has become a subsidiary of the Company. As of 31st March 2011, the Company holds equity investment of Rs.10 million in GETL. As explained in the Directors' Report, there is an enormous market, both global and domestic, for the business contemplated by GETL in the range of above 30 to 100 MW turbines. The results of the subsidiary will be consolidated with this Company. Accumulated Losses As on 31st March 2010, the Company had accumulated loss of Rs.257.9 million arising from the erstwhile Retail business. Further, during the year there is a loss of Rs. 72.7 million as goodwill of Rs.559.8 million has been fully written off during the year. Thus, the accumulated loss as on 31st March 2011 stands at Rs.330.5 million. In view of the profitable nature of steam turbine business, the Company is hopeful of liquidating all such losses in the next year. BUSINESS RISKS AND MITIGATION The Company's business, manufacturing and marketing of steam turbines, falls under capital goods industry and has a direct bearing with the country's economic activity. Even though several factors are not within the control of the Company, the Company strives to mitigate those externalities in the best possible manner so as to achieve optimal and diversified revenue stream in order to grow and improve the profitability. Major risks Economic Slow Down The slowdown in economy reduces the demand for capital goods/infrastructure requirements. It may adversely impact the growth of the Company's business. Rising Interest rate Rising interest rates and non-availability of adequate financing generally has direct impact on the growth and viability of creation/expansion of production capacities. Technology Risk Considering the industry in which the Company operates, it is imperative to continually upgrade the products to meet the expectations of the customers and product offerings of the competitors and failure to do so may lead to obsolescence of the products and decline in market share. Competition Risk The Company faces competition from both the domestic as well as international manufacturers. Risk mitigation measures The Company has developed a framework under which the risks are reviewed on a continuous basis and appropriate action is taken as warranted by the situation. The Company is cognisant of the major risks and takes following measures for mitigating the risks associated with the business: Presently, the Company predominantly caters to the requirements of the domestic market, with export forming only about 11% of its total turnover. While the economic growth of the country is expected to increase by 7-8% for the next several years, the Company is focusing to diversify its market by introducing different models of its products and to increase the proportion of exports in the turnover. The Company's focus on expanding its geographical spread will insulate the business from any slackness in demand from one region. The Company's recent joint venture with GE to offer turbines in the above 30 to 100 MW range would also help the Company to enhance its product range and to access global as well as domestic market. Further, to maintain and enhance the profit margins, the Company strives to also increase the proportion of the after-market business including the refurbishment and re-engineering of larger size turbines. This two-pronged strategy will help the Company to reduce its over-dependence on one market as well as to maintain its profitability even under any difficult business conditions. The Company manufactures products which, to a large extent, cater to the captive and co-generation power users. During times of high interest rates or scarce bank credit, such units are compelled to focus on efficiencies and cost control to protect their bottom lines and are thus not averse to make investment to reduce the operating costs and to economize the operations. Further, the Company also offers aggressive after-market services to the customers who are not inclined to invest in new or expansion of existing production capacities. This helps the Company to maintain its profitability. The opportunities for export of surplus power at competitive prices are also another driver for the end-users in investing in captive/ co-generation facilities in view of shorter pay-back period. The Company is continuously investing in its in-house R&D programmes for the development of new models and for enhancing the product ranges to broaden its market and to increase its market share. The Company takes cognizance of the competition and accordingly, benchmarks its products to stay ahead by continuously upgrading the technology. Further, the Company, through value engineering, endeavours to provide an outstanding value proposition to the customers. The Company attaches greater importance to its supply chain with a view to source the inputs of good quality raw materials at competitive prices and with reliable delivery timelines.