MANAGEMENT DISCUSSION AND ANALYSIS
Economic and Industry Overview
The objective of this report is to convey the Management s perspective
on the external environment as well as strategy, operating and financial performance,
material developments in human resources and industrial relations, risks and
opportunities, and internal control systems and their adequacy in the Company during FY
2022-23. This should be read in conjunction with the Company s financial statements, the
schedules and notes thereto and other information included elsewhere in this Integrated
Report and Annual Accounts 2022-23. The Company s financial statements have been prepared
in accordance with Indian Accounting Standards ( Ind AS ) complying with the requirements
of the Companies Act, 2013, as amended and regulations issued by the Securities and
Exchange Board of India ( SEBI ) from time to time.
Global Economic Outlook
The global economy is gradually recovering from the impact of pandemic
and at the same time facing new challenges emerging from Russia s invasion of Ukraine. The
continuing Russia-Ukraine war along with central banks hiking rates to tame inflation
continues to weigh on economic activity. Despite monetary tightening, inflation is
persistent in many key economies and it is anticipated that global inflation will fall
from 8.7% last year to 7% this year and settle at around 5% in the year 2024.
Indian Economy
GDP growth rate in 2022-23 is expected to be 5.9%, lower than the
2021-22 growth of 6.8% due to subdued external demand and tightening monetary policy.
However, India will remain the fastest-growing major economy. Brent oil prices are
expected to remain range bound in 2023-24 given the continuing war in Ukraine and
sanctions imposed in response by the USA and European Union. India meets nearly 80% of its
oil needs through imports. High oil prices will also have a trickledown effect on the
prices paid by consumers for goods and services. Persistent inflation resulted in RBI to
increase the repo rate by 250 basis points throughout FY 2022-23. Capital investment of
close to 3.3% of GDP is expected to crowd-in private investment, strengthen job creation
and demand, and raise India s overall growth potential. Focus is expected in the energy
sector, with significant capital investments towards energy transition and green hydrogen
mission. The gross FDI inflows fell by 16% in 2022-23 compared to 2021-22. On the other
hand, net FDI inflows fell by 27% in 2022-23. Foreign portfolio investment (FPI) in India
fell to Rs 40,936 crore in 2022-23, a sharp decline from a healthy Rs 2,67,100 crore
inflows recorded in 2020-21. In the last decade or so, India has become one of the
attractive destinations for Foreign Direct Investment (FDI). India s foreign exchange
reserves were placed at $ 578.4 billion as on March 31, 2023. India now stands at 10th
rank in terms of business environment for the period 2023-27. The country ranked fifth
among the world s top leading stock markets with a market capitalisation of $3.31 trillion
as of March 2023.
However, retail inflation in March 2023 at 4.7 per cent the lowest
since October of 2021. At Rs 17.33 lakh crore, the fiscal deficit for 2022-23 amounts to
6.4 per cent of the GDP, data released by the Controller General of Accounts (CGA), on
account of a higher government expenditure during the year under review.
Indian economic reforms and Budget 2023- 24 provisions
The Union Budget for FY 2023-24 aims to further strengthen India s
economic status. In the75thYear of India s Independence, the World has
recognized the Indian Economy as a bright star with its Economic Growth estimated at 7 per
cent, which is the highest among all major economies. The government is emphasizing the
role of PM Gati Shakti, Inclusive Development, Productivity Enhancement & Investment,
Sunrise Opportunities, Energy Transition, Climate Action, and Financing of Investments.
To ramp the virtuous cycle of Investment and job creation the budget
took lead again by steeply increasing the capital expenditure outlay by 37.4 % in BE
2023-24 to whooping Rs. 10 lakh crore over Rs. 7.28 lakh crore in RE 2022-23. In FY
2023-24, Ministry of Defence (MoD) has been allocated a total Budget of Rs 5.94 lakh
crore, which is 13.18 per cent of the total budget (Rs 45.03 lakh crore). A boost was
provided to India s electric vehicle policy Scheme for Faster Adoption and Manufacturing
of Hybrid and Electric Vehicle in India . MoRTH, said ? 10,000 crore is planned to be
raised through Infrastructure Investment Trusts (InvITs) mode in FY 2023-24. The Ministry
of Road Transport and Highways (MoRTH) has put plans in place to maintain the pace of
highway development and construct 12,500 km of highways in the current financial year,
Agriculture and rural startups will receive funds from NABARD. the government has
increased the institutional credit allocation for the agricultural sector to Rs 20 lakh
crore in Union Budget 2023-24. PLI Scheme for Food Processing will have positive impact on
income of Indian farmers and MSMEs. The PLI scheme - Modified Programme for Semiconductors
and Display Fab Ecosystem -was announced in December 2021 with a total outlay of ? 76,000
crore.
Global power sector overview
Renewables continued to remain the centre stage of climate commitments
across the globe. This segment received maximum investment of $ 495 billion (up 17% year
over previous year) out of total pie of $ 1.11 trillion among all the low carbon energy
investments made in 2022 and continued to grow despite the persistence of geopolitical
issues. By the end of 2022, renewables generation capacity reached 3,372 GW, grown by 10%
from the previous year. Renewable power growth for the next five years is expected to be
driven by Europe, China, the United States and India, which are all implementing policies
and introducing regulatory and market reforms more quickly than previously planned to
combat the energy crisis. As per IEA, renewables are set to account for over 90% of global
electricity capacity expansion till 2027.
Due to high gas prices and supply constraints, coal is replacing
natural gas for power generation in markets with spare coal plant capacity, particularly
in European countries seeking to end their reliance on Russian gas imports. Gas power is
expected to fall by 2.6% as declines in Europe and South America outweigh growth in North
America and the Middle East.
Indian power sector overview
In the year 2022-23, when countries across the globe were struggling to
keep up their economic growth trajectory amidst persistent inflation and rising interest
rates, India s economy continued to grow, posting the strongest growth amongst developing
nations. India came across as a bright spot posting a GDP growth of 6.8%.
India s installed generation capacity stands at 416 GW as on March 31,
2023, with capacity addition of close to 17 GW in FY23. The capacity additions in FY23
happened, majorly in the renewables segment, led by solar. Renewables accounted for more
than 90% share of the capacity addition in FY23, continuing a similar trend from the
previous year. Over the past few decades, the country has seen a remarkable evolution.
Today, almost every citizen has access to grid electricity, power deficiency has reduced
and renewable energy capacity has reached a fourth of capacity. To meet the increasing
demand for electricity in the country, a major addition to the installed generating
capacity is mandated. With a generation capacity of 395.07 GW, India is the third-largest
producer and the third-largest consumer of electricity in the world. Although power
generation has grown more than 100-fold since independence, growth in demand has been even
higher due to accelerating economic activity. Power consumption was estimated at 1894.7
TWh in 2022. Moreover, the country ranked sixth in the list of countries to make
significant investments in clean energy at US$ 90 billion. India was the only country
among the G20 nations on track to achieve its targets under the Paris Agreement. The
country achieved success in its newer energy development initiatives.
Business Performance Review Insulators Division
During the year under review, the division has registered a turnover of
389.57 crores as against 385.45 crores and profit before
interest & depreciation of 41.83 crores as against 37.96 crores of
previous year. In spite of shrink in domestic demand company has achieved higher turnover
due to increase in exports. Also inspite of steep rise in input costs company has been
able to improve profitability by taking various initiatives to reduce cost and improve
process/recovery etc.
Terry Towels Division
The turnover of this division has been 41.39 crores as against
50.77 crores and Loss before interest & depreciation have been 2.96
crores as against Loss of 3.49 crores of previous year. Steep rise in cotton
prices has led to loss during the year.
Exports
The company is the largest exporters of H.T. Porcelain Insulators from
India. The Company has achieved export turnover of 176.39 crores during the year
as compared to 151.35 crores in previous year showing as impressive growth of
about 16%. The company has managed their export business well by continuous communication
with their all valued overseas customers and kept supply chains flowing in spite of the
geo-political tensions in various International regions. The company is also exploring
insulator markets for newer application like RTV coating, developing big diameter &
high strength Hollow Insulators, special insulators for reactor applications etc. This
would help the company to enhance its ability to cater the diverse needs of global
customers and strengthen its presence in all corners of global market.
The company is also continuously focusing on economizing the
manufacturing by way of R&D activities, better process control and getting optimum
utilization of its productive resources, so that products of the insulator division remain
competitive in terms of quality and price in the international market. Company is
regularly supplying to all the major multinational OEMs for their worldwide requirements
of quality Porcelain Insulators. Post COVID pandemic, the company established
innovative ways to communicate with its International customers. This includes weekly
video conferences, expansion of agent network worldwide to increase customer penetrations
and opening avenues for new customers. Besides, the company increased international travel
to meet customers and also inviting customers to visit & audit its manufacturing
facility.
With the growing inconvenience of Europe customers to source from
China, the company seized this opportunity to increase business in Europe. Further the
company is also working to gain approval from hitherto unserved countries like Saudi
Arabia, Kuwait & Oman. Concerted efforts are also on to add new customers in
developing countries like Bangladesh, Sri Lanka, Nepal, Peru, Nigeria, Ethiopia &
other South East Asian Countries. Globally insulator industry is going through a
consolidation phase and many of the competitors are going through M&A activities. This
is helping the company to strengthen its position in international markets.
ANALYSIS AND REVIEW
The company continues to be a leader in the manufacture of Extra High
Voltage Insulators in the country. Despite stiff competition, buyers show interest in
company s products for its quality & timely delivery. The company has a well-equipped
R & D laboratory, which takes care of the stringent quality requirements of customers
and ensures quality and reliability in each and every product manufactured so that
companies product remain competition in international market. In-house R&D activities
have a thrust on qualitative development to replace expensive input raw material & to
bring consistency in quality of the product under manufacture.
The company has a fully equipped SGI and Aluminium foundry to cater
demand from various segments apart from fulfilling company s major captive requirement of
SGI and aluminium castings in required time frame.
Opportunities & Challenges
Insulator demand is expected to improve in medium term with Central
Electrical Authority (CEA) targeting to upgrade the existing transmission lines and adding
new substations. Railway electrification in the country is in full swing which will
further increase demand of insulators in the coming months. Indian railways are also
laying additional lines to cater to high speed trains along with existing OHE line. This
has increased insulator demand further. Also we are putting all our efforts to promote
Long Rod Insulators to all potential SEBs & private TSPs.
In Exports, increased demand of insulators seen in various markets.
Opportunities are seen in Bangladesh as they are going for the increase in transmission
capacity. In Gulf region, newer infrastructure projects in Renewable Energy & hydrogen
production giving opportunities for insulators supply. In European Union, ongoing revamp
projects and increase in gas prices making customers to look at suppliers from Asian
countries. USA has recently announced infrastructure bill to augment their transmission
and distribution lines.
RISKS & CONCERNS
The broader trends in the economy are expected to have a direct impact
on your Company s growth prospects as well. Inflation is expected to remain elevated for
the foreseeable future, driven by war-induced commodity price increases and broadening
price pressures. In addition, increase in interest rates by Central Banks are also
expected to lower growth and exert pressure on economies particularly those in emerging
markets. In these circumstances, the ability to successfully navigate cost pressures would
have a significant bearing on the overall performance of your Company.
OUTLOOK
The overall domestic insulator demand was sluggish in last few years
but is expected to rebound over next few years as stalled projects are moving to the
execution stage now. Capex in power sector as announced in union budget may drive demand
for the insulator industry in the power generation, transmission, and distribution
sectors.
+91-9892691696
