Alfa Transformers Ltd Management Discussions.

ECONOMIC OUTLOOK :

Transformer Industry is dependent fully on Government Policies as it is the key link between generation and end user of electric power. The Government has declared many schemes to revitalize the power sector so as to make power available to the entire Citizen. This effort of the Government results in the increase of the transformers market and supply side like logistics, manpower, finance etc.

However, all these schemes and incentives of the Government have started giving result, the outbreak of Corona Virus (COVID-19) Pandemic has spoiled the environment and the Transformer Industries were affected badly. It had a significant impact on the business operations of the Companies by way of interruption in production, supply chain disruption, unavailability of workmen/personnel and closure/lockdown of production facilities. The Company observed all the Government advisories and guidelines thoroughly and in good faith. In the beginning of the Financial Year ended on 31st March, 2021, the operations were disrupted due to the pandemic situation and our Vadodara Unit has stopped its manufacturing activities for above reasons including lack of orders.

INDUSTRY OUTLOOK :

The Economic Survey 2020-21, was presented on 29th January, 2021 which showcased the state of the Power Sector. Accordingly to the survey, the power sector has gone through significant transformation on both the demand with regards to integration of green energy. The generation capacity stood at 373 GW in October, 2020. The budgetary allocation for the Ministry of Power stood at Rs. 153.22 Billion for 2021-22. The Finance Minister had announced Rs. 3059.84 billion Scheme for 5 Years to reform the distribution segment. The scheme will provide assistance to discontinue for infrastructure, creation, up-gradation of systems which will allow them to workout tangible plans to reduce the losses over the period.

Moreover, the Transformers installed during 1985-90 are expected to be replaced during 12thFinancial year plan considering the average transfer life of 25 years.

Given that the Transformers are integral components of Power Network, their demand would remain robust in the long run. The National Infrastructure Pipeline (NIP) has estimated a Capex of over Rs. 3000 billion each in the transmission & distribution segments between 2020-25. As such, notwithstanding occasional downturn in order flows and in sales volume, the demand outlook for Transformer is positive for the coming years. In fact, it has been observed that DISCOM Companies of different States have started floating tenders for procuring Transformers.

OPPORTUNITIES :

Your Company is one of the reputed manufacturing unit in the Country in the medium sector and planned to avail the present opportunities so as to revive the Company. Accordingly, the Vadodara Unit has participated in recent tender floated by DISCOM of Gujarat and procured. The Company successfully developed one no of 500 KVA Special type of Transformer for Tata Power Central Odisha Distribution Limited (TPCODL) for their pilot project and expecting more nos of Transformers during the Financial Year 2022-23.

THREATS:

DUAL AUTHORITY : We are concerned with distribution transformers which are installed networks at 11kv, 22kv and 33kv transmission lines to supply power to user. The distribution transformer business Suffered from challenges last few years emerging from mandatory certification of BIS as per IS 1180 and MEPS through BEE star Programme. These two statutory regulations were not synchronized initially resulting confusion and financial burden. Dual certification and different specification increased the financial burden and created confusion in the mind of both buyer and industrial user alike. Initial absence of clarification on confusion created by these orders caused sis cord and resulted in financial burden to those who follow law and rules and Standards. Enforcing regulation on large number of small and medium industries by two Govt. of India entities is extremely difficult operations by enforcing authorities BIS and BEE because of lack of resources of trained manpower and logistics. WARRANTY: Discoms are demanding for guarantee period of 3 to 5 years in place 12 to 18 months which is resulting increase in requirement of bank guarantee and repair cost during guarantee period. Most of the utilities have not yet have maintenance schedule of Transformers. Once a Transformer is installed no maintenance like filtration of oil, replacement of gaskets etc. are undertaken. As a result failures are more due to lack of care than manufacturing defects under these circumstances. Demand for guarantee beyond 18 Months has become a great burden on Transformer industry. Our industry is suffering due to lack of sufficient Bank Guarantee limits. We are facing difficulties to take orders for insufficient Bank Guarantee limit. Efforts are being made by ITMA to redress the situation. However Unified oppositions to this unfair treatment are yet to be seen. Besides above, the factors like addition of huge manufacturing capacity of existing units increase in input cost and requirement of working capital will lead to subdued financial performance.

COMPANYS STRATEGY : z Focus on type testing of various rating of transformers so as to qualify to participatemore type of Transformers. z Empanelment with PGCIL, NTPC, Railways etc. Solar project companies z Focus on energy efficient transformers & Special Type of Transformers. z Technological advancement to improve performance parameters and productivity. z In order to avail the benefits due to present favorable scenario in the market due to increase in demand in Gujarat, the Company has decided to start manufacturing in its Vadodara Unit. Accordingly, the Unit has participated in tender floated by DISCOMs of Gujarat and has procured a small order of Rs. 12.53 Crores from them. After completion of this order, the Company has hopeful to get repeat orders from them.

FOR AND ON BEHALF OF THE BOARD

Sd/- Sd/-
PLACE: BHUBANESWAR DILLIP KUMAR DAS DEEPAK KUMAR DAS
DATE : 24th August, 2022 MANAGING DIRECTOR DIRECTOR