Alfa Transformers Ltd Management Discussions.

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 like Ujwal DISCOM Assurance Yojana (UDAY), DeendayalUpadhyaya Gram JyotiYojana (DDUGJY) etc. Government had also committed to generate 175 GW of Solar, Wind, mini hydel and biomass based power by 2022Government of India had also focus on attaining power for all, which resulted in the increase of the transfer market and supply side like logistics, manpower, finance etc.

At the time when all these schemes and incentives of the Government have started giving result, COVID-19 Pandemic has spoiled the environment and the Transformer Industries has effected badly. The Company was closed completely more than one month due to Locked out declared by the Government. After the factory was allowed to function, the manpower was restricted for ensuing the health and well being of all employees. Further all the process of tenders/orders is virtually stopped by Electricity Utility Companies. Until unless the effect of pandemic is completely nullify, the situation of Transformers Industries may not be improved.

REPLACEMENT DEMAND GROWTH :

The transformers installed during 1985-90 are expected to be replaced during 12th Financial Year Plan considering average transformer life of 25 years.

CORRECTION OF REGIONAL IMBALANCE:

Orissa will attract more investment based on this policy of present Government. With further initiative of the Government and strengthening the transmission grid, reduction of power losses, replacing very old transformers and picking off of exports etc. the transformer industry expects sustained growth in coming years.

STUMBLING BLOCKS :

DUAL AUTHORITY

We are concerned with distribution transformers which are installed networks at 11 kv, 22kv and 33 kv 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

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.

CONCLUSION :

Transformer industry is expected to go through the growth potentials in midst of issues/bottlenecks. Despite problems we expect industry would grow and expect a healthy growth will come with better regulating environment.

COMPANYS STRATEGY :

• Focus on type testing of various rating of transformers so as to qualify more

• Empanelment with PGCIL, NTPC, Railways etc. Solar project companies

• In Vadodara Unit sales is to be increased to benefit from economies of scale leading to improved profitability and emphasis is to be given for timely execution to avoid penalty. In Bhubaneswar Unit focus is to be given on private orders, export and repairing and opt out from Govt. orders due to insufficient margin and absence of price variation clause.

• Focus on energy efficient transformers

• Technological advancement to improve performance parameters and productivity.