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BSE: 504008 | NSE: EMCO ISIN: INE078A01026
Market Cap: [Rs.Cr.] 199.01 Face Value: [Rs.] 2
Industry: Electric Equipment

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Management Discussions

Economy and Market Overview

The slowdown in economic growth which began few years back extended in the financialyear 2013-14 too. The country's economy grown 4.9% in 2013-14, marginally above 4.5%clocked last year.

Power Sector in India

The Power sector in India is facing many headwinds such as shortage of domestic fuel(both coal and gas), poor financial position of state power distribution companies anddelays in land acquisition and forest clearances, among others. However, recentannouncements by the Central Government, such as approving imported coal price pooling totackle domestic coal shortage, and framing of SEB restructuring policy to improve theirfinancial health, have enthused the Power sector.

With the growth of India's economy, demand for energy will also grow. Indian Powersector needs to plug the gap between demand and supply through renewable and non-renewablesources as well as proper transmission and distribution channels.

India is the 4th largest energy consumer in the world with a per capita consumptionaround 7.5 KW h/yr. The demand for energy has grown closer to 3.5% per annum over the lastthree decades.

During the financial year 2013-14 electrical equipment industry has shown some revivalafter a negative growth of -7.8% in last fiscal 2012-13 and it is expected that trend willcontinue in current fiscal despite the country sluggish improvement in adding powergeneration capacity on the back of growth in demand from ongoing and upcoming transmissionprojects.

Transformer Business

In spite of general economic slow-down and particular slow down in the Power Sector dueto various issues, your company has received many prestigious orders from variousutilities and industries from India & abroad.

During the year 2013-14, your company has produced and dispatched many Large rating ofPower Transformers from its Thane Plant and Medium & Distribution Transformers fromits Jalgaon Plant.

Your company has got accreditation from NABL for the Testing facilities at Thane Plant& is in the process of getting accreditation for the Jalgaon plant's testingfacilities. During the year we have successfully tested 315 MVA, 400 kV Auto Transformerat KEMA - Netherlands for the Dynamic Short Circuit withstand capability and thetransformer passed in the first attempt, proving the strong technical base of your companyonce again.

'EMCO Care' the service business of your company has also got it self registeredwith all major utilities as authorized Service Provider for repairs of all kinds oftransformers.

Project Business

As the growth in the Power Sector is generally sluggish, demand is low, hence it leavesno room for inefficiency. Your company has also aligned and consolidated its resources bymerging of functions of Sub-Station and Transmission Lines SBU. It takes pride in beingone of the uniquely positioned companies in the country capable of executing EPC works inthe transimission sector for both Sub station and Transmission Lines and hence isreceiving continuous business from Central Utilities based on excellent past performance.

In 2013-14, your Company commissioned 765kV transmission line of 130 kms. from Meerutto Agra and 87 kms. from Ranchi to Sipat for Power Grid Corporation. Your company alsocompleted 400kV D/C Quad line from Kalisindh to Anta of 82 kms. and from Chabbra to Antaof 89 kms. for RRVPNL. These Lines were charged within target time lines inspite of stiffRight of Way issues including delayed Forest Clearances. Your Company has also beenappreciated by State Utility ( RRVPNL) for delivering 8.5 kms section of Kalisindh Line inforest within record time of less than 3 months from the date of Statutory clearanceduring Heavy rains and Floods. Your Company is also pleased to inform you that executionof 800kV HVDC order is also progressing satisfactorily.

Your Company also received New orders from Power Grid Corporation for EPC of 400 kV D/CTransmission lines. With a healthy order book position the Transmission Lines businesscontinues to be the growth engine of your company and is also looking for opportunities inselect international market to further fuel this growth. Your company achieved significantincrease in productivity of your Vadodara Tower Steel Factory and also successfullyexecuted the maiden order of Transmission line towers for Middle East.

The Sub-Station business continues to be subdued due to continuous delay in closure ofexisting sites due to various reasons and recovery of retention money.

Your company has been successfully progressing in execution of its maiden InternationalOrder for Project Division, for EPC of 330/132kV Sub-Stations.

Your Company has received a Award from Power Grid Corporation of India for AggregateVolume of Work done amongst others Transmission lines during 2013"

Meter Division

This division is focused on executing existing order on hand. It has slowed down inbooking new order till all the old orders are executed to the satisfaction of thecustomers and there is a revival in the margin in this business, which currently is undera lot of pressure.

International Business

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

Consistently meeting International quality standards, your Company has today exportedits Products and Solutions to more than 50 countries including Americas, Europe, MiddleEast, Africa and Asia Pacific to an impressive International clientele that ranges frompower Utilities, oil and gas sector, Mining, EPC contractors and Industries.

2013-14 was a milestone year for International Business and this SBU registered year onyear growth of more than 200 % in sales and 100% in Order Booking . Your Company alsofirmly established its presence in Latin America.

With a focus of Increasing Project Exports, your Company received its first EPC orderfor 330 KV Substation Order which is currently being executed. Your Company has alsosuccessfully executed large orders for the supply of Tower Steel and conductors to MiddleEast.

Going forward with a very healthy Order book position and good references. Your companyis confident of substantially increasing the percentage of International Business inoverall business of the company. This growth will be fuelled through healthy mix ofcustomers worldwide and across all product segments without any dependence on specificproducts and markets which will make it very sustainable.

Coal Mine-Indonesia

Production level of coal mines in Indonesia was over 1.2 million tons in last calendaryear 2013. In the current year production level of coal is expected to be around 2 millionper annum. The Current coal prices are under pressure due to economic slow down, but inthe long run we expect good return on our investment in the coal mines.

Renewable Energy

Power generation from 5 MW PV Base Solar Plant was satisfactory throughout thefinancial year and it is expected to remain unchanged in current financial year too. TheCompany is getting regular payment from its customer. The plant is doing well andgenerating sufficient green energy, so as to avoid 7,500 MT of Carbon emissions per annum.

Power Generation from 10.5 MW Wind Mills was satisfactory at its wind farms in the lastfinancial year. In current financial year also we expect power generation to besatisfactory.

IPTC Project

In this fast changing economic world, your company wishes to have some portion of itsincome coming from fixed sources, which will provide cash flow and profit stability to thecompany for the long term.

With this objective the Company had participate in the opportunity opened in thetransmission sector and got awarded 3 IPTC projects on BOOM (build own operate andmaintain) basis in the State of Rajasthan for setting up 220kV/ 400 kV transmission lineand sub-stations for 25/35 years on BOOM basis.

In one of the Projects, the Company has signed TSA and obtained Transmission Licenseand all statutory approvals in the name of its wholly owned subsidiary ShekhawatiTransmission Service Company Ltd (STSCL) and execution of project is in progress. It islikely that other two projects awarded to the Company alongwith consortium will be handedover to us in current financial year.

It is expected that the Company would invest in these projects, build and operate themfor 25/35 years, in return, the company would earn a fixed income in the form oftransmission charges from the users of transmission line (the distribution companies).There projects are with secured payment terms.

Internal Control

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

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

Human Resource

Human resource at EMCO continues to go through a challenging phase while it iscelebrating its 50 successful years of existence and now is the time to contribute inevery possible way to ensure business growth. Businesses across the board haveconsolidated its position and now they are looking to take the north direction in comingyears.

HR continues to lead various initiatives in order to achieve our vision "To bea world class company through reliability and Be a great place to work" and hencehas implemented various employee engagement initiatives in the last one year.

Certain initiatives highly appreciated by the EMCOites are;

a) We conceptualized a new initiative "Saturday Ki Pathshala" a monthlyinformal session with EMCOites; to help them relook at subjects like positive thinking,stress management, team work etc. These sessions are a mix of audiovisual, games andtheory which helps unlearn and relearn the basics. These in-house sessions are conductedacross the locations and also for our Shop Floor EMCOites.

b) Various Pathshala sessions have contributed to stream line the thinking and workingpattern of Individuals. This has indirectly impacted the growth of business in a positiveway.

c) We also got associated with an Organisation Development consulting firm which isworking on various initiatives across divisions with a long term plan to bring a positivechange. The intervention caters to the behavioral development need of different roleholders which may include Chairman to supervisor as per the need and analysis done. Thebroader objective has been to create a psychological safe environment, promote ValueDriven Culture, Leadership identification and development across the organisation.

d) We also conducted Employee Engagement survey at the organizational level. Thestrength and areas of improvement from the survey were highlighted and communicated to alldivisions, necessary action is also planned so as to improve the engagement score in thecoming year.

We continued with established initiatives like celebration of Women's Day, EMCO PremierLeague, Spouse Day and other festivals.

Environment and Safety:

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

Your company is committed to safety at work place and bagged Safety Hero Award duringan international event Exhibition and Global conference on Occupational Health and Safetysponsored by M/s UBM Asia. The Company has also achieved more than 1000 accident free daysat its Jalgaon plant.

Your Company has also bagged The Bronze Trophy and felicitated at 53rdAnnual Awards 2013 by ABCI (Association of Business Communicators of India) for its SafetyAnthem "Ek Vaada Suraksha Ka" under nominated category of Multimedia, CD Rom andPresentation.

Your Company had taken active step to demonstrate social cause on World Environment DayEMCO team had visited "Hariyali's plantation & Water conservation project atBhavale -Lonad" and planted 200 trees in mountainous hilly area of 600 feet above theground under the guidance of Hariyali officials.

CSR - Initiatives towards Corporate Social Responsibility:

Your Company has taken various initiatives towards the Corporate Social Responsibilitythrough its extended arm EMCO Foundation. EMCO Foundation (Foundation) was established topromote sustainability and welfare of humanity with a vision "To transform livesthrough sustainable development involving stakeholders." Since inceptionFoundation have transformed lives of more than 51,000 people through our initiatives inEducation (Akshar), Environment (Ankur and Roshni) and Healthcare (Jeevan).

Education (AKSHAR):

Keeping in mind trust in education sector EMCO Foundation has designed its umbrellaprogram "Akshar" through three pronged approaches for under privilegedschool going children.

Firstly, through' "Shiksha" project an initiative of creatinginterest among under privileged slum children of age group 6-14 yrs for education andmotivating parents to enroll them for mainstream education, this year 400 childrenreceived basic education of English, Marathi and Arithmetic. This is a life time treasureof knowledge and education interest for these children. So far our foundation reaches outto 12,270 children in various slums of thane and Jalgaon.

Secondly flagship program Parivartan-a soft skill development initiative hastransformed lives of 5,783 students of 8th, 9th & 10th std. thisyear. Health awareness and career guidance has given them a suitable direction towardsbetter & successful life. This project has benefited to 23,894 students so far intransforming their lives.

Lastly under "Yashasvi" project, your foundation has supported 65needy SSC scholar students of Municipal schools and trust run school with scholarshipsupport for continuing their education up to graduation. A new initiative started thisyear to offer scholarship to 7th passes student too for continue theireducation till SSC and 25 such students got benefited out of it. So far Foundationsupported 343 students who are doing well in their post SSC education.

Environment (ANKUR):

Under our 'Ankur' project plantation of 209 trees and maintaining the earlierplanted ones was done by EMCO Foundation. Your foundation has also done the awarenessamong EMCoites on preservation and promotion of good environment by planting trees and useECO friendly product in day to day life. So far your foundation has planted 2,215 trees.

Healthcare (JEEVAN):

Like earlier years, the blood donation camps were organized under project Jeevan. EMCOitesparticipated enthusiastically and contributed in the noble cause of saving someone's life.Through the camps organized at various locations 209 units of bloods were collected. Sofar we have collected 1,535 units of bloods which were given to reputed blood banks in thearea

EMCO Foundation In collaboration with Retina India conducted Free Retina Eye Checkupcamp on 15th December 2013, in Jalgaon. Eye Specialist Doctor gave a briefintroduction about the eye problems, specifically about Diabetic Retinopathy, RetinaDetachment etc. Team of six Doctors was present in the camp for eye checkup and Lasertreatment was given to patients with Retina problems. About 600 people from Jalgaondistrict got benefited from this camp.

Joy of Giving week (JOGW)

Foundation organizes JOGW every year at all its premises. This year too it wasorganized from 2nd to 9th October 2013. Our EMCOites and otherstakeholders have donated various old useful articles and same was further handed over toNGO for distribution to the poor and needy persons.

Forward Looking Statements

Certain statements in the Management's Discussion and Analysis describing the Company'sobjectives, projections, estimates, expectations or predictions may be forward lookingstatements within the meaning of applicable securities laws and regulations. Forwardlooking statements are based on certain assumptions and expectations of future events.

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

On behalf of the Board of Directors
For EMCO Limited
Mumbai Sd/-
April 25, 2014 Chairman
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Rajesh S Jain , Chairman

Shailesh S Jain , Vice Chairman

S V Deo , Director

Bheru Choudhary , Director

Company Head Office / Quarters:

N-104 MIDC Area,
Phone : Maharashtra-91-257-2272462/2272572 / Maharashtra-
Fax : Maharashtra-91-257-2272598 / Maharashtra-
E-mail : emco.jelgaon1@emcoindia.com
Web : http://www.emcoindia.com


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