Texmaco Rail & Engineering Ltd

BSE: 533326 | NSE: TEXMACO RAIL | ISIN: INE621L01012 
Market Cap: [Rs.Cr.] 1,450.54 | Face Value: [Rs.] 1
Industry: Engineering

Director's Report
Report of the Directors

Your Directors have pleasure in presenting the 3rd Operational Annual Report of theCompany along with the Audited Accounts of the Company for the year ended 31st March,2013.

Financial Results

Rupees in Lakhs

2012-13 2011-12
Operating Profit (PBIDT) 14,813.99 15,050.50
Less: Interest (Net) 398.14 506.98
Gross Profit (PBDT) 14,415.85 14,543.52
Less: Depreciation 939.18 917.80
Profit before Taxation 13,476.67 13,625.72
Less: Provision for Taxation:
Current Tax 4,012.00 3,940.00
Deferred Tax Liability/(Asset) 37.76 380.00
Profit after Taxation 9,426.91 9,305.72
Add: Balance brought forward from previous year 9,214.23 7,024.07
18,641.14 16,329.79
Appropriations
Proposed Dividend on Equity Shares (Incl.Tax) 2,129.62 2,115.56
General Reserve 5,800.00 5,000.00
Balance Carried Forward 10,711.52 9,214.23
18,641.14 16,329.79

During the year under review, the Company managed to achieve steady performance despitedifficult business environment and decelerating economic growth. The Management is anxiousabout the delay in release of regular annual wagon orders by Indian Railways, which isessential to maintain production momentum.

The Gross Turnover for the year stood at Rs. 1036 crore, net of the value offree-supply inputs including steel and components of over Rs. 338 crore, provided to theCompany by Indian Railways and other clients for some large value contracts.

Gross Turnover (Without FIM)

The Gross Profit for the year (PBDT) and Profit Before Tax (PBT) were at Rs.144.16crore and Rs.134.77 crore respectively. The Net Profit was Rs.94.27 crore, after providingfor a tax liability of Rs.40.12 crore. The Deferred Tax Liability of Rs.0.38 crore for theyear has been created in the Profit and Loss Account in accordance with the AccountingStandard 22 "Accounting for taxes on Income", issued by the Institute ofChartered Accountants of India.

Dividend

The Directors are pleased to recommend payment of a dividend of 100% for the year endedMarch 31, 2013 having regard to the performance of the Company.

The Management Discussion and Analysis

The year opened on a buoyant note with a healthy order book. The Management expectsfurther orders to be awarded in continuation for RSP 2012-13, which held out the prospectof an accelerated production rate to demonstrate the yearly production capacity of theCompany up to a level of 10000 wagons or an average of 800 wagons/month given adequateworkload. The Company accordingly planned and achieved a record production butunfortunately it lasted for just about 4/5 months during the year owing to the ordersrunning out without follow-up tender for 2012-13. Currently, the production capacity islargely languishing for want of orders.

Going by the projections of the Railway Board, the Company has built the bestinfrastructure in the industry, aspiring to be a world class facility. However, theerratic procurement programme of the Railways has despaired the Management in having tolive with an under-utilised capacity set up with huge investment. The Management has beenpleading with the Ministry of Railways that it will be mutually rewarding to have avibrant industry to build a most modern rail transport system which is concomitant witheconomic planning worldwide. The revenue stream of the Railways is essentially supportedby the freight earnings. Hence, it is high time that the Indian Railways espouse thegrowth of the wagon industry in a spirit of partnership.

In the above backdrop, the Company has taken decisive steps to diversify in new growthareas in the Rail sector. Further, the organisation is being revamped for sharper focus onexports, and intensified efforts in engineering and marketing of high value-added productsin the Steel Foundry, Heavy Steel Structural and Mechanical Engineering Divisions.

Heavy Engineering Division Rolling Stock

During the year, your Company rolled out 3876 wagons valued Rs.756.77 crore, whichcomprised approx. 31% to non-Indian Railway customers. The said performance was achievedon the back of Indian Railways’ order for 3915 wagons placed on the Company againstRSP 2011-12, partly released in Q4, FY 2011-12 and partly in Q2, FY 2012-13. This was thelargest ever quantity ordered by the Indian Railways on any wagon builder.

The aforesaid wagon order helped your Company achieve record performance close to 500wagons per month during August – November 2012. Unfortunately, just about that time,while due to critical supply position of free supply wheelsets from RWF, Bangalore, theproduction had to be tapered off from December 2012 onwards, the order released for2011-12 was also exhausted with production for the Indian Railways going down to thelowest ever, mere 4 wagons in March 2013.

In the normal course, such a situation would not have arisen if only the Railways wouldhave invited tenders in time for wagon procurement for the year 2012-13, which stillcontinues to be outstanding. Meanwhile, the year 2013-14 has also commenced. The Railwayshave a budgetary approval to procure around 15000 wagons each in the years FY 2012-13 and2013-14. It is anomalous that in spite of this fairly large procurement programme approvedby the Parliament, the Company is starved of Indian Railway wagon orders in the currentyear. Numerous representations have been made at the highest level in the Ministry ofRailways, and the Management hopes for early invitation for wagon tenders and release oforders.

In the non-Indian Railway segment, your Company, which has maintained its lead in theindustry, is managing its operations by turning out Special Purpose Commodity Specificwagons, and wagons for exports.

With the announcement of Automobile Freight Train Operator Scheme (AFTO), the Companyexpects a substantial demand for Auto Car wagons considering the rapid growth ofAutomobile Industry in the country. The conceptual design of Double Deck Auto Rake,developed in collaboration with an European Company, has already been approved by RDSO,and the detailed Drawings along with other relevant documents are awaiting final approvalof RDSO. Besides, the Company is also moving fast to manufacture prototype wagon on thebasis of RDSO design to offer multiple options to the customers.

Further, your Directors have to report that in collaboration with its joint venturepartners UGL Rail Services Ltd., Australia, the Company has submitted final design &drawings to RDSO for Double Stack Container Rakes, for which there would be substantialdemand with the operation of Dedicated Freight Corridors.

Dedicated Freight Corridor (DFC)

In the backdrop of the progress made so far by the Dedicated Freight CorridorCorporation of India Ltd. in certain sectors, particularly in the Western Corridor, yourCompany is gearing up for developing and supplying 25t Axle load wagons with specialbogies for which the Company is well equipped.

EMU Coaches

After receiving a trial order for a rake of 9 EMU coaches from Indian Railways, theCompany instead of taking it up along with wagon manufacture at Agarpara Works, decided toset up an independent modern facility at its Sodepur Works on the main BT Road, Kolkata.This decision was influenced by long term consideration of the huge growth potential ofthe high speed precision coach segment.

Accordingly, your Directors are pleased to report that the work on a State-of-the-Artfactory is proceeding apace and expected to be completed in the 3rd quarter of FY 2013-14.The manufacture of the components and sub-assemblies using high precision jigs, fixturesand equipment, along with procurement of bought outs from approved sources are underway tokeep up with the schedule.

Your Directors are pleased to report in particular that the project has the benefit oftechnical support from Kawasaki Heavy Industries (KHI), Japan, under a TechnicalAssistance Agreement with them, which, inter alia, also provides for exchange and trainingof personnel. KHI are also actively pursuing to secure a contract for Electric Locomotivesfor the Dedicated Freight Corridor, and it is proposed to make use of the manufacturingfacilities of the Company for localization (Indigenization).

Joint Venture with UGL Rail Services Ltd., Australia

The joint venture Company, Texmaco UGL Rail Pvt. Ltd., has commenced commercialoperation of its State-of-the-Art facility in Q1, FY 2013-14, after successfulinstallation and commissioning of the major plant and equipment, viz. Plasma, Oxy &Laser Cutting machines, Welding and Bevelling Robots, Synchronised Press Brakes, CNCMachining Centre, Sophisticated Heat Treatment and Painting Solutions, etc., sourced fromthe world’s leading producers. The facility is unique in terms of hi-techmanufacture, safety and quality.

The ramp up with progressive commissioning of the entire facility is proceedingsmoothly along with the appointment of key senior personnel. The technology transfer fromAustralia is ongoing. The JV has achieved its first two prestigious export orders forsupply of Loco Bogie Frames for operation in Kazakhstan & Queensland Rail. Furtherorders are expected to flow in.

Joint Venture with Touax Rail, France

The Joint Venture Leasing Company Touax Texmaco Railcar Leasing Pvt. Ltd., is exploringall business opportunities and has identified certain specific business schemes / segmentsunder (i) Container Train Operators (CTOs), (ii) Liberalized Wagon Investment Scheme(LWIS), (iii) Automobile Freight Train Operators (AFTO) for movement of automobiles, and(iv) Special Freight Train Operators (SFTO).

The JV is going through an evangelization period of interacting with the industry onthe benefits of leasing as against owning the Asset on the Balance Sheet with bankfinancing. However, the slow growth of the economy is weighing on the decision makingprocess, but the outlook remains positive.

Hydro Mechanical Eqpt, Steel Structures & Process Equipment

Your Directors are pleased to report the improved prospects in the Hydro-mech and SteelStructural Division of the Company. The Division booked orders valued Rs.60 crore in theyear under review, and the turnover of the Division was higher at Rs.44.24 crore, ascompared to Rs.33.91 crore in the last year. With improved opportunities and localpolitical problems easing out, the Division is expected to fare better in the currentyear.

A good number of Hydro Project enquiries from public and private sectors in India andabroad are being received. The Company is also participating in the Hydro Project tendersin Nepal, Bhutan and some of the Latin American countries. During the year, your Companyhas developed business relations with leading multi-nationals in Hydro Power from Russiaand Iran.

Besides, the Division is exploring opportunities in refurbishment / replacement of oldHydro Projects & Barrage Equipments. It has recently completed the firstrehabilitation job at Farakka Barrage and upgradation work for Tailrace equipments atRampur HE Project.

The Company has been engaged on important projects of National Hydroelectric PowerCorporation, Govt. of India (NHPC). Your Directors are pleased to report the successfulcommissioning of 132 MW (4 x 33MW) TLDP-III HE Project (NHPC) on river Teesta in WestBengal during FY 2012-13, and the plant is in commercial generation since February 2013.

The execution of various other projects in hand has picked up momentum in Nepal, andthe States of Arunachal Pradesh, Assam, Himachal Pradesh, Sikkim, J&K. The total HydroPower generation from these projects will be approx. 3500 MW.

Further, the Company has intensified participation in steel bridge, flyover structuretenders, and is presently responding to Railway Bridge enquiries, both domestic and fromthe neighbouring countries. The Division has obtained RDSO registration for participatingin Railway Bridge tenders of Indian Railways and its subsidiary companies.

Steel Foundry Division

The Foundry maintained a production of 17840 tons, about the same level as in theprevious year in spite of the depressed demand. The despatch dropped to 15733 tons against16951 tons in the previous year. However, in terms of revenue, the Foundry turnoverrecorded a marginal growth of 4% at Rs. 2182 million.

The exports from the Foundry at Rs.223 million were higher by 11.6% over the last yearin spite of global slowdown. There was commendable success in starting the export of CastManganese Crossings, an important Railway Track component, to North America. The Divisionhad a robust order-book of over Rs. 350 million at the end of the year.

The Railway Castings developed by the Foundry for CIS market have successfully passedthe tests in overseas laboratory. A high level Inspection Team from the CertificationAuthority conducted the audit of the Foundry and has recommended for Certification. Theentry in this market will serve to enhance the Division’s exports.

Your Directors are happy to inform that the upgraded High Tensile Centre BufferCoupler, which was approved by RDSO in substitution of AAR approved imported coupler, isnow being regularly supplied to the Indian Railways, resulting in substantial saving offoreign exchange.

Further, your Directors are pleased to report that the Tight Lock Coupler Castingdeveloped by the Foundry to the design of an internationally renowned Company had won theprestigious "Casting of the Year" Award, and Mr. Tapan Roy, Asst. GeneralManager (Methods) of the Foundry, the award of "Young Foundryman of the Year"from The Institute of Indian Foundrymen.

Agro Machinery Division

The performance of the Division was at a low ebb owing to suspension of activity fornearly 10 months up to mid October 2012 due to non availability of imported Diesel Enginesfrom Siam Kubota Corporation owing to devastating flood in Thailand.

Furthermore, the non-release of Government Subsidy Schemes coupled with inordinatedelay in disbursing outstanding subsidy payment impacted the performance of theDivision.The despatch, therefore, was only 177 nos Power Tillers this year. The Companyhas offered a newly introduced Power Reaper Harvesting machine to SRFMTTI, Anantpur, A.P.,for testing and approval to launch in the market under government assisted programmes. TheDivision is expected to fare better in the current financial year.

Exports

During the year, your Company executed export orders worth Rs.941 million comprisingHigh Capacity Mineral Wagons, Meter Gauge Container Flat Wagons, BG Bogie Tank wagons toAfrica and Bangladesh, and steel castings to North America and Australia.

The Company had a robust export order-book of approx. Rs 2261 million at the close ofthe year.

R & D Activities

The R&D activities of your Company are focused on development of new hi-techproducts for domestic and export markets as well as establishing upgraded manufacturingprocess to address better quality and delivery management.

In Steel Foundry Division, the Company has invested substantial time and effort indevelopment of critical products by adopting complex processes and going through series oftests to come up with prototypes as per the specified quality parameters. The Company hasgone into commercial production, after stringent inspection and approval of Coupler forIndian Railway passenger coaches, Side Frame & Bolster Casting of bogies for export toUSA & CIS countries, high integrity CMS Crossing for USA, and the couplers againstimport substitution for Indian wagons. The Company has also taken lead in developingcastings for Mining industry, which have hardness to withstand high impact and are used inwear-resistant application. The Division is also engaged in development of :-

1. A fine grain metallographic structure with the use of inoculation with nanoparticles to obtain superior physical properties in Hadfield steel.

2. A new design knuckle casting for Indian Railways where the life will increase by 20to 25%.

The Rolling Stock Division is in advanced stage of design development of :-

1. Double Stack Bogie Container Flat Wagon (with technical support from UGL, Australia)

2. Double Deck Car Carrying Wagons (with technical support from Tatravagonka, Slovakia)

The Hydromechanical & Structural Division has successfully developed the design ofa Solid Cast Steel Sill Beam, which has been adopted in the prestigious Subansiri H.E.Project (Arunachal Pradesh). It would prevent damage to the Bottom Sill Beam andthe Bottom Rubber Seals of the gates due to the impact of boulders.

IT Services

The IT Services Department has been engaged in progressive development of a responsiveand efficient IT networking and application to meet the business requirement of differentDepartments. The factories and the administrative offices at Works and Corporate office atBirla Building, Kolkata are all integrated through VPN on-line connectivity with highbandwidth. After initial start with ERP system Oracle ‘11i’ with the assistanceof the Implementation Agency PwC, there has been a migration to more advanced systemOracle R12, which has got stabilised in the procurement, stores and finance functions.Various critical reports required by the respective functional Heads of Departments forMIS and operational control have been designed and deployed in the R12 system.

The phase 2 implementation for extension of R12 ERP system to the Manufacturingoperations has been initiated, and it is expected to be in effective use for optimisedproduction planning and control by the end of FY 2013-14.

Human Relations

Your Company continues to invest in the employees through structured trainingprogrammes and educational support in diverse related disciplines. The Management believesthat the talent, knowledge, experience and passion of the employees build the competitiveadvantage of the Company.

Hiring and retaining talent have become a business imperative for the success of theoperations, and it impacts how the Company steers and how it wins business. Your Companycontinues to maintain cordial & harmonious industrial relations over the decades whichhas been cited in the industry as a model of constructive co-operation between the Workmenand the Management. Your Directors commend the dedication and deep commitment of theworkmen, staff and officers in building the corporate image through sustained pursuit ofexcellence.

Opportunity & Threats

In the current political environment with all parties trading charges against eachother and the electronic and print media running stories of corruption endlessly, theindustrial climate in the country happens to be clouded as reflected by the major economicindices touching new lows. Some Cassandras have even put a question mark on India’sgrowth story. This is not wholly unexpected with increasingly fractured polity in ourdemocratic framework. The political rumblings have been accentuated with an eye on thegeneral election in 2014. One could also view them as a sign of vibrant democracy.

The more serious concern, however, appears to be the impact of the continuing globaleconomic slowdown, capped by the threat of sovereign bankruptcies in Euro zone. The hugestimulus packages have been used to avert the looming crises, but the whole systemcontinues to be fragile. The indication of slow down in China has added to the disquietand uncertainty.

Taking a long-term view of the growth prospects of the sectors in which your Company isengaged, your Directors continue to support investment in technology and human capital. Itwould enable the Company to reap the opportunities in the infrastructure sector which hasthe highest growth potential and forms the core of the national and state economicplanning.

At the corporate level, the Management is wholly focused on building up its strengthfor Delivery Management and Quality Assurance. A series of programmes are run regularly onHuman Resource Development with substantial outlay on education and training. It wouldhelp the Company emerge intrinsically strong to cope with all challenges ahead.

Corporate Social Responsibility

Your Company earnestly believes in the pro-active role and responsibility of thebusiness to improve the quality of lives of the people. That is what really matters in aWelfare State. The corporate world has to work with the Government to promote‘Inclusive Growth’ to strengthen the democratic framework afflicted with wideeconomic disparities in the social strata. The economic growth has to be shared with allsections of society to maintain a proper balance.

The Company undertakes welfare programmes from time to time, and makes sure that thehelp reaches directly to the needy, especially in the area of health and education. It haspromoted computer literacy through distribution of computers for the benefit of the familymembers of the employees. Beside grants and scholarships for prosecuting the studies,special rewards have been announced for academic excellence. This has earned your Companytremendous goodwill in the neighbouring localities.

Further, for easy mobility of the employees to go about their vocation and dailyliving, the Company also went about distribution of two-wheelers under a liberal scheme.Several initiatives have been taken to support deprived women and make them independentthrough proper training and self employment in alliance with different NGOs.

In keeping with the commitment of the Company in the area of environment, ISO14001:2004 Certification was received during the year after complying with a number oflegal and regulatory requirements.

Corporate Governance

A separate report on Corporate Governance pursuant to Clause 49 of the ListingAgreement with the Stock Exchanges is attached as a separate Annexure and forms a part ofthis Report.

Directors’ Responsibility Statement U/S 217(2AA) of the Companies Act, 1956

Your Directors state:

(i) That in the preparation of the annual accounts, applicable accounting standardswere followed, along with proper explanations relating to material departures, and theNotes in the Auditors’ Report in this regard are self-explanatory;

(ii) That such accounting policies were selected and applied consistently andjudgements and estimates made that are reasonable and prudent, so as to give a true andfair view of the state of affairs of the Company at the end of the financial year, and ofthe profit of the Company for that period;

(iii) That proper and sufficient care was taken to maintain of adequate accountingrecords in accordance with the provisions of the Companies Act, 1956 for safeguarding theassets of the Company, and for preventing and detecting fraud and other irregularities;

(iv) That the annual accounts were prepared on a ‘going concern’ basis.

The SEBI’s guidelines regarding Corporate Governance have been implemented by theCompany. An Audit Committee of the Board and Investors’ / Shareholders’Grievances Committee have been constituted and are functioning in keeping with the givenguidelines.

Green Initiatives

Your Company has started a sustainability initiative with the aim of going green andminimizing the impact on environment. The Company has issued a notice dated 20th December,2011 in respect of the same to the Shareholders to opt for paperless compliances i.e.receipt of Annual Reports and Notices etc. through e-mails. Your Company has startedsending Annual Report, Notices etc. through e-mails to the Shareholders, whose e-mail IDsare registered with their Depository Participants. In case a Shareholder wishes to receivea printed copy, he / she may please send a request to the Company, which will send aprinted copy of the annual report to the Shareholder. Members are requested to supportthis initiative by registering / updating their email addresses for receiving AnnualReport, Notices etc. through e-mail.

Particulars of Employees

The number of employees as at 31st March, 2013 was 1665. A statement containing therequired particulars of employees as stipulated under Section 217(2A) of the Companies(Particulars of Employees) Rules, 1975, is enclosed - Annexure A.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

As required under Section 217(1)(e) of the Companies Act, 1956, read with Rule 2 of theCompanies (Disclosures of Particulars in the Report of the Board of Directors) Rules,1988, information relating to conservation of energy, technology absorption and foreignexchange earnings and outgo is enclosed – Annexure B.

Directors

Shri Sunil Mitra was appointed as an Additional Director w.e.f 5th November, 2012.Notice has been received from a Member of your Company under Section 257 of the CompaniesAct, 1956 for the appointment of Shri Mitra as Non-Executive and Independent Director, whohas filed his consent to act as Director of your Company, if appointed.

Your Directors, Shri Sampath Dhasarathy and Shri Akshay Poddar, retire by rotation andbeing eligible, offer themselves for re-appointment at the ensuing Annual General Meeting.

The Board has recommended their re-appointment.

Auditors

The Auditors, M/s. K.N. Gutgutia & Co., Chartered Accountants, retire and areeligible for re-appointment.

For and on behalf of the Board
Place: Kolkata S. K. Poddar
Dated: 30th May, 2013 Chairman

Annexure - A

For The Financial Year ended 31st March, 2013

Particulars of Employees under Section 217(2A) of the Companies Act, 1956 and formingpart of the Directors’ Report

Name Designation Age Remuneration Qualifications Experience Date of Commencement of employment Previous Employment
(Years) (Rs.) (Years)
1 2 3 4 5 6 7 8
Employed throughout the year and in receipt of remuneration aggregating Rs. 60,00,000/- or more
1. Poddar Saroj Kumar Executive Chairman 68 3,69,81,858 B. Com. (Hons.) 44 01-01-2006 M/s. Poddar Heritage Investments Limited
2. Maheshwari Ramesh Executive Vice Chairman 80 1,22,54,831 M. Com., L.L.B. 57 01-02-1962 M/s. F & C Osler (India) Limited & Sister Concerns
3. Kela Damodar Hazarimal Whole-time Director 72 71,33,002 B.E. (Metallurgy) 48 14-11-2000 M/s. Hindusthan Engineering & Industries Limited

Notes: 1. Remuneration as shown above includes Salary, House Rent, LTA, MedicalBenefits, Bonus, Contribution to Provident Fund, Superannuation Fund, etc. as perCompany’s rules.

2. Shri Saroj Kumar Poddar is related to Shri Akshay Poddar, Director of the Company.

3. Employees named above are whole-time / contractual employees of the Company.

4. Other terms and conditions are as per Company’s rules.

Annexure - B

Information as per Section 217(1)(e) of the Companies Act,1956 read with Companies(Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 as part of theDirectors’ Report for the year ended 31st March, 2013

I. Conservation of Energy

a) Energy conservation measures taken:

Engineering Works

i) Installation & commissioning of Power Factor Improvement System continued duringthe year.

ii) Load management for reducing Max. demand continued during the year.

iii) Installation of a 10 MVA 33KV/11KV Power transformer to share the load of existingand thereby reducing the Load losses on the existing transformers.

b) Additional Investments and proposals, if any, being implemented for reduction ofconsumption of energy:

Modification of Equipments & their drives is being done regularly to reduce energyconsumption.

c) Impact of the measures at (a) and (b) above for reduction of energy consumption andconsequent impact on the cost of production of goods:

i) Impact of measures under (a)

By proper staggering the production activities and constant monitoring the electricalload, maximum demand has been kept under control.

ii) Impact of measures under (b)

This is an ongoing exercise benefit of which is available in long term.

d) Total energy consumption and energy consumption per unit production as per Form A ofthe Annexure to the Rules in respect of Industries specified in the Schedule thereto:(Steel Foundry)

2012-13 2011-12
i) Power & Fuel Consumption :
Electricity Purchased
Units (in thousands) (
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

S K Poddar , Executive Chairman

A C Chakrabortti , Director

Ramesh Maheshwari , Executive Vice Chairman

D H Kela , Director


Company Head Office / Quarters:

,
Belgharia,
Kolkata,
West Bengal-700056
Phone : West Bengal-91-33-25691500 / West Bengal-
Fax : West Bengal-91-33-25412448 / West Bengal-
E-mail : ak.vijay@texmaco.in
Web : http://www.texmaco.in

Registrars:

Karvy Computershare Pvt Ltd
21Rd No-4,Street No-1,Banjara Hills,Hyderabad - 500 034

 
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