CG Power & Industrial Solutions Ltd Management Discussions.

The world, as a collective, is witnessing a rare and inspiring display of human resilience to adversities, and ingenuity to overcome unsurmountable odds. The COVID-19 pandemic appears to chart the downwards curve, as we steadily progress towards a herd immunity, thanks to increasing block of vaccinated population. The uncertainty around new mutated variants and uneven access to vaccine, however, warrant COVID appropriate behaviour till the pandemic is fully eradicated or contained from everywhere.

In Retrospect

The World: The year gone by (2020-21 for India and 2020 for the world) was the worst affected period, as it started with the outbreak and ended with the arrival of the second wave for most parts of the world. With prolonged period of domestic/ localised lockdowns and tremendous restrictions on international flow of goods and people, economic activities became a secondary consideration while the driving focus cantered around saving lives, for the most part of this period.

The human response to this mammoth challenge was as befitting. From the governments to the regulators to the medical fraternity to the social fabric to the scientific community, the world responded in one faith and with one resolve. From discovery to its commercial global roll out, COVID-19 vaccines would go on to feature among one of the fastest developed ones in the human history. But for this localised/fragmented yet unified global response, the fatalities to the pandemic could have been much higher.

However, the gains made on the social front got balanced off with the losses made on the economic front. Sudden imposition of movement restrictions, widespread employment losses, the fear psyche, supply chain disruptions and widespread liquidity crunch transitioned the global economy into a sustenance mode (from an uninterrupted ten-year-long spree of growth mode). Such widespread, intense and volatile was their impact that the global economy recorded its deepest contraction of the living memory.

India: With the second largest population of the world, a moderate per capita income and an inadequate healthcare infrastructure, India looked vulnerable to begin with, in the face of mammoth challenge that the pandemic posed. The Central Government, with its steely resolve and a calibrated approach that transitioned from ‘nothing ahead of the people to ‘lives and livelihood in a situation-appropriate manner, went on to emerge as a global role model for efficient and responsible handling of the pandemic. Consequently, the country recorded one of the lowest per capita infections and casualties among nations with comparable socio-economic metrics. Besides the governments and authorities, the spirited response of the frontline warriors – medical fraternity, civic administrators, law and order paraphernalia and essential services providers – coupled with a restrained and resilient public response to the clarion call of COVID-appropriate living helped tame the wrath on social front.

The Central and State Governments worked in cohesion while the Reserve Bank of India stretched beyond the usual policy support measures to introduce bold relief measures like loan moratorium and record liquidity infusion. A massive economic stimulus, record distribution of free

Economic Growth

International Monetary Funds World Economic Outlook of October 2021 (WEO) estimates world output to have contracted by 3.1% in 2020. At 4.5%, the contraction in the advanced economies block was far more severe than the 2.1% contraction recorded ration and a range of policy reforms under ambitious ‘Atma Nirbhar Bharat (self-reliant India) campaign not only addressed the current need of safely navigating the crisis but also laid foundation for sustained economic recovery and growth for the future.

In emerging markets and developing economies block. World trade volumes contracted by 8.2%. Commodity prices recorded a steep drop, led by a 32.7% drop in average crude oil prices.

For India, the economic impact of a nationwide lockdown, which commenced a week ahead of the beginning of the financial year 2020-21, manifested itself in form of an instant 24.4% contraction in national GDP for the first quarter. Thereafter, activities started gaining pace, on the back of partial lifting of restrictions synchronously coupled with a slew of support measures. At 7.4%, the shrinkage was far lesser in the second quarter. Growth rate came in black with a nominal 0.5% GDP growth in the third quarter and followed it with a 1.6% growth in the concluding quarter. Cumulatively, the countrys GDP recorded an annual contraction of 7.3% for FY2020-21.

Looking Ahead

With the pace of vaccination reaching optimum levels across all major economies and the access improving amonglow-incomecountries,economic recovery continues to gain momentum. Gradual easing of restrictions is leading to acceleration in demand. Supply side constraints including higher input prices and shortages need to be overcome. Potential downsides include uneven access to vaccine, threat of new variants, rising inflation, lowering of policy support and muted CAPEX trends.

The factors supporting economic growth include the lower base, pent up demand, normalisation across sectors, lower cost of capital and increased investor activities. WEO estimates the world output to grow by 5.9% and 4.9% in the years 2021 and 2022 respectively. It pegs Indias GDP growth to reach 9.5% in FY22 and 8.5% in FY23.

Industrial Sector Overview

With around 17% contribution to the national GDP, manufacturing sector in India offers significant headroom for growth. Realising its true potential and the role manufacturing sector can play in employment generation and exports, the Government of India has been making a slew of synchronous moves to transform India as a global manufacturing hub. Slashing of corporate tax rates, massive infrastructure push, ease of doing business, Atmanirbhar Bharat and the recent Production Linked

Incentives (PLI) scheme are all aimed at unleashing countrys latent potential in global manufacturing value chain.

With the demand environment poised to steadily firm up, the country is expected to enter into its next multi-year CAPEX cycle. A number of favourable factors – improving capacity utilisations, low interest rate and production-linked incentives among others – are slated to push the country forward on the path of globally competitive manufacturing.

Power Sector Overview

India is the third largest producer and consumer of Power energy. With installed generation capacity of 391 GW (as on 30.09.2021), the countrys non-fossil fuel generation assets accounts to 40% of the total installed capacity. In order to make a massive transition towards solar energy, the country has set an ambitious target of more than quadrupling its solar generation capacity to 450 GW by 2030. Private sectors share in the generation segment has steadily risen to breach 48% as on 30.09.2021.

The country deploys one of the largest operating synchronous grids to transport power. Keeping pace with rising share of renewable energy (RE), the country is currently implementing phase 1 of Green Energy Corridor (GEC), a comprehensive scheme for evacuation and integration of RE capacities. With a view to integrate future RE generation capacities, the Government is readying to launch Phase 2 of GEC.

Distribution segment, the weakest link of the fast-transforming Indian Power Sector, is headed towards structural recalibration with a slew of bold and much needed reforms. The upcoming Electricity (Amendment) Bill, 2021 aims to de-licence electricity distribution and thereby let the consumers choose what kind of electricity to use and whom to buy it from. The Bill, once implemented on the ground would go a long way in transforming the entire Power Sector.

The Union Budget 2021-22 allocated Rs. 3.05 Lakh Crore for the power distribution segment, to be released over five years. The move is aimed to assist distribution infrastructure development, feeder separation, and smart meter installation and is likely to help DISCOMS strengthen their financial health.


Indian Railways, mainstay of mass transportation of goods and people in India, is among the largest rail networks in the world. Its route length network is spread over 67,956 kms, with 13,169 passenger trains and 8,479 freight trains, plying 23 million travellers and 3 million tonnes (MT) of freight daily from 7,349 stations.

Indian Railways is now looking to transform itself on all the needs and services with enhancement in speeds, passenger comfort, world class amenities at stations, train safety being central to it. While working for above objectives, Indian Railways also has strong plans to improve upon its own business performance in terms of enhancement of its operational efficiency as well as its modal share of business. For achieving its medium and long term goals and targets, Indian Railways is making huge investments in all the required areas through 100% electrification of its BG track network, introduction of High

Horsepower Freight locomotives, new Generation of Train-sets, modern and lightweight coaches, redevelopment of stations, advanced train protection and communication systems. Indian Railways also plans to adopt business models such as PPP, Privatisation, Asset Monetisation to meet their infrastructure building and investment objectives.

Indian Railways has been fast modernising itself with sharp focus on efficiency, passenger safety and convenience, technological advancements and eco-sensitive operations. With a view to create a ‘future ready Railway system by the turn of this decade, it has prepared a National Rail Plan for India – 2030. Union Budget 2021-22 has made a record allocation of Rs. 110,055 crores, for Railways of which Rs. 107,100 crores is for capital expenditure with thrust on electrification, freight corridor (Golden Diagonal and Golden Quadrilateral) and urban transport system.

Business Overview

CG Power and Industrial Solutions Limited ("CG") is a global leader and pioneer in the management and application of electrical energy. It provides end-to-end products and solutions for the effective and sustainable use of power.

With various manufacturing facilities located across Madhya

Pradesh, Maharashtra and Goa, CG manufactures a wide range of products. The Companys business is arranged under two major business segments namely Industrial Systems Business and Power Systems Business. A market leader in India in its key product lines, CG has a strong global presence with exports to many countries across the world.

Industrial Systems Business

Motors: CG is the largest manufacturer of Low-Tension Motors in India, offering a range of 0.18kW to 710kW in multiple variants and standards and also customized configurations to suit all the industrial sectors. The Company also offers Medium Voltage Motors up to 20 MW in various constructions to suit all the core sectors. Fractional Horse Power (Single phase) Motors up to 5.5 kW are used for all general purpose applications in Domestic, Industrial and Agricultural. CG is the first company to indigenously develop and supply a complete range of IE2,

IE3 and IE4 efficiency Motors in India. CG is a pioneer in making hazardous area application Motors with a market share of more than 60%. CG is the only Company to have a NABL accredited test laboratory for LV Motors testing up to 560kW as per IS/IEC 60034- 2-1:2014 and IS12615 in India. CG is a forerunner in the indigenously developed Electrical Vehicles Motors and Controller for 2 / 3 wheeler and bus category. CGs innovative ‘Smart Motor solution helps customers monitor motor operations and health remotely for preventive maintenance.

Railways Products: CG offers the most comprehensive solutions in Rolling stock and Signaling segment to Indian Railways, producing a wide and comprehensive range of Traction Motors and Alternators, Traction Converter, Auxiliary Converter, Propulsion System and Train Control and Management System, Railway Signalling products - Relays, Electric point machine, Coach products - BLDC Carriage Fan, Control Panel for Locomotive, Self propelled traction equipment DETC, SPIC DEMU and Propulsion system for MEMU and EMU.

Drives & Automation: Drives & Automation business comprises low voltage AC Drives (LV & MV), Soft Starters, Shaft Power Monitor, Solar Drives, PLC and HMI under the ‘EMOTRON by CG brand, well accepted in India, Europe and Middle East. The Drives and Automation has its state-of-the-art R&D, design and development centres in Sweden and India along with two manufacturing facilities and solution providing teams for various industries in Germany and Netherlands apart from India and Sweden.

Commercial Products: CG re-launched its Fast Moving Electrical Goods (FMEG) range of products in 2019 after a gap of 3 years. It consists of consumer electrical products like domestic and agricultural Pumps and industrial and domestic Exhaust Fans. Looking at the quick regaining of the market share, CG is preparing to extend FMEG product range in next financial year.

Business Process Automation: CG Industrial System was the first to build business process automation on the digital platform way back in 2009, which has immensely helped its channel partners and the business in doing business transactions and ease of doing business. CG provides end to end paper less business solutions to its channel partners. CG also provides their large customers product offerings along with technical documents through their paper less OGS (Offer generating system).

Business Updates

Since the infusion of capital and restoration of people confidence, the business operations have steadily been normalising. Confidence of customers, channel partners and vendors alike has been restored and the Industrial Systems Business is well on course to regain its market position and share. Armed with an unmatchable range of products, the largest installed capacity and a reputation synonymous with quality, the business is aiming to cement its position as a technology leader offering technologically superior products.

Segment Performance:

The pandemic impacted the overall economic environment and led to slump in demand during the Q1 and Q2. Adapting to the new normal, the business managed to mitigate lockdown impact by interacting with the channel partners and customers through digital media and supporting them for their critical requirements. With pickup in economic activity in Q3 and Q4 and increase in demand, despite the COVID pandemic, CG has quickly aligned the supply chain and operations with the evolving market scenario with an idea to make the most of the existing opportunities in sectors like Water and Waste Water, Pharmaceuticals, Ethanol, Cement, Steel and Railways. At the same time, it is identifying newer growth opportunities in fast moving Electrical Goods, like domestic and agricultural pumps. With this swift alignment with the market demand, overall performance improved for the year.

Segment Outlook:

With the change in market dynamics due to pandemic, the Sales and Marketing organizations adapted to new normal and focused on fast growing sectors like Water and Waste Water, Pharmaceuticals, Oil and Gas, Infrastructure and core industries like cement and steel to re-establish lost ground. With well established strong channel partners across India for Industrial systems and largest product basket for end to end solution across the industry, the focus remains to gain back lost market share.

Having been a strategic partner in technological upgrade and evolution for Indian Railways, CG is working on a range of breakthrough products and solutions. It has designed and developed traction motor for the upcoming 9000HP high speed freight electric locomotives. The Company continues to manufacture and supply the latest IGBT based 3 phase Drive Propulsion System for the 6000 HP Electric Locomotives, complete traction transmission system of Diesel Electric Tower cars, standard and special application signalling relays and electric point switches. It is also working on design and manufacturing of IGBT based propulsion system and other equipment for MEMU and EMU trains.

During the year, the Company received major orders like 55 sets of Self propelled diesel electric tower car (DETC), 38 Loco transformers for 6000 HP Electric Locomotives, Propulsion system for 1x rake of EMU and 2x rakes of MEMU underslung type. Besides, it is also executing order of propulsion system for 6 rakes of On-board MEMU.


Consolidated Financial Performance

(Rs. in crores)

INDUSTRIAL SYSTEMS FY 2021 FY 2020 Growth (%)
Unexecuted Order Book (UEOB) 1742 1668 4.41
Net Revenue 2092 2361 (11.4)
EBITDA (Including Other Income) 265 305 (13.1)
EBIT 201 246 (18.3)
Capital Employed 386 (126) 406.6
Return on Capital Employed (%)* 52% NA NA


Note: *Capital employed is negative in FY2020. Thus, ROCE is not calculated. Figures have been re-grouped wherever necessary to make these comparable.

Power Systems Business

CG is one of the largest Electric Equipment manufacturers for the Power and Industrial sector and also offers turnkey solutions in Power Distribution and Generation. It deals in manufacturing of Transformers (Power and Distribution Transformer), Switchgears (Extra High Voltage and Medium Voltage Switchgear) and Relay, Automation. CG also provides turnkey solution through its Engineering Project Division. CG is an acknowledged leader in its business and has substantial domain knowledge and expertise.

Transformers: The Power Transformer and Distribution Transformer plants are based at Bhopal and Gwalior, respectively. In the Bhopal plant, CG is manufacturing Power Transformers namely Generator Transformer, 500 MVA Auto Transformers, Shunt Reactor (110MVAr-125MVAr), 120MVA Furnace Transformers, 7.7 MVA, 25kV Locomotive and 30.24MVA Track Side Transformers. Transformer products are conforming to IEC, ANSI, IS, BS and other related international standards.

CG was the first Indian manufacturer to develop and supply coupling transformers for Dynamic Reactive Power Compensation (DPRC) applications like Static Synchronous Compensator (STATCOM) and Static VAR Compensator (SVC). In its Gwalior plant, company is manufacturing Distribution, Low Power, Green, Locomotive and Solar Transformers.

Distribution Transformers ranging from 315 KVA to 4 MVA, 3.3kV to 33kV Class are mainly used for Industrial application whereas Low Power Transformers ranging from 4 to 50 MVA, 11kV to 132kV Class are for Generator, Station, Unit Auxiliary and Multi winding. CG is also manufacturing Locomotive Transformer 5.4MVA, 25kV Class for Railways and Solar Transformer for Invertor Duty up to 10MVA, 33kV Class. CG is the first manufacturer of 132kV Green Transformer in India.

Switchgears: The Switchgear plants are based at Nashik and Aurangabad in India. In its Nashik Switchgear plant, under MV Switchgear, CG is manufacturing Indoor Air Insulated Switchgear (AIS) panels and Outdoor Breakers, Single Pole 25kV Breaker for Railway, Line up and Roof Bushing Kiosk, Gas Insulated Switchgear (GIS), Indoor/Outdoor Ring Main Units (RMU) up to 36kV Class. Under Relay and Automation product portfolio, the Company manufactures CG Series Current and Voltage Numerical

Protection Relay, Self-Powered Relay for Ring Main Unit (RMU). CG also manufactures Aegis Series Feeder, Transformer and Motor Protection Relays, Auto-reclose Relay and Feeder Remote Terminal Unit (FRTU) for RMU automation.

Under EHV Switchgear, following products are also manufactured by CG - Current Transformers, Transformer Bushing, Capacitor and Inductive Voltage Transformer, Surge Arrestors, SF6 Circuit Breakers, Air Break Disconnectors, Gas Insulated Switchgear (EHV GIS). CG also provides Digital solution like Control and Relay Panel (CRP), Substation Automation System (SAS), Breaker Monitoring Device and Control Switching Device (CSD). Switchgear products are conforming to IEC, IEEE, ANSI and GOST standards.

CGs Nashik Plant is having one of the largest Indoor Test Laboratories of 1600kV Ultra High Voltage, comprising of 1600kV Series resonance test system and 3600kV Impulse Voltage test system. Facility-wise, it is among the top 5 in the world.

In its Aurangabad Switchgear plant, CG is manufacturing Vacuum Interrupters ranging from 690V to 72.5kV Class, Vacuum Contractor and Capacitor Switch of 12kV Class, Auto Recloser and Sectionalizer up to 36kV, Transformer Bushing 52kV and 72.5kV, Current Transformer and Inductive Voltage Transformer ranging from 33kV to 170kV Class. It also provides Power Quality Solutions consisting of Automatic Power Factor Correction System and Static VAR Compensator (STATUCOM) up to 36 kV.

Business updates

Since the infusion of capital and restoration of people confidence, the business operations have steadily been normalising. Confidence of customers and vendors alike, have been restored and the Power Systems business unit is well on course to regain its market position. With an aim to regain its erstwhile market position, Power Business division is speedily strengthening its supply chain, engineering talent and Research and Development apparatus.

CGs continued focus is on Research and Development (R&D) activities to deliver value to its customers. It is constantly working on enhancement of product features to existing products and services as well as new product development for supporting future growth. It will be strengthening its presence in the power sector and expanding its market reach and product portfolio. Companys businesses are intertwined with and are core to the growth of the economy.


During the financial year, the business performance was impacted by COVID-19, where factories halted production during nation-wide lockdown (mainly during April to June 2020). Subsequently, the factories resumed in a phased manner, while the Company continued to provide service support to its customers via digital technologies. Customers were also affected by the pandemic and the Company supported them by adapting digital solutions that demonstrated customer focus. Digital solutions have been rolled out for Remote Factory Acceptance Tests by providing video streaming directly from the test area to the screen of the customer via mobile cameras. This solution has helped to eliminate the requirement of physical presence for customer material inspection and assisted in streamlining online customer inspection process. Technical webinars and seminars were conducted for product presentation and providing site service support and were attended by various customers virtually.

Market Penetration: The goodwill that was created with its customers and dealers over the long years as a reliable quality supplier of goods, customer value propositions, customer confidence rebuilding and revival has resulted in the Company having won some significant orders from various Electricity Boards, Utilities, Industries and Indian Railways.

Product Installations

Products Installation at Various Sites.

Commissioned 33 kv and 145 KV GIS at DMRC Charkop s/s at Mumbai

Commissioned 400KV CTS, GCBS and LA and 145KV CTS at Tstransco Narsapur s/s

Commissioned 40 MVA, 132/33 KV Power Transformer supplied to PTCUL, Padartha

Commissioned 500 MVA 400 KV Auto Transformer at PGCIL Badla

Commissioned 66/11 KV GIS Substation along with 2 x 31.5 MVA transformer at BRPL, Sangam Vihar


Consolidated Financial Performance

(Rs. in crores)

POWER SYSTEMS FY 2021 FY 2020 Growth (%)
Unexecuted Order Book (UEOB) 1164 1814 (35.8)
Net Revenue 862 2736 (68.5)
EBITDA (Including Other Income) (23) (130) 82.3
EBIT (82) (266) 69.2
Capital Employed (643) (694) 7.34
Return on Capital Employed (%)* NA NA NA


Note: * Capital employed is negative in FY 2020 and FY 2021. Thus, ROCE is not calculated. Figures have been re-grouped wherever necessary to make these comparable.


( Rs. in crores)

FY2021 FY2020 FY2021 FY2020
2526 3169 Net Sales and Services 2964 5110
1750 2179 Cost of raw materials and components consumed and construction material 1974 3329
259 323 Employee benefits expenses 372 867
403 564 Other expenses 510 918
114 103 EBIDTA excluding Other Income (OI) 108 (4)
42 57 Other Income (OI) 111 48
156 160 EBIDTA Including OI 219 44
166 248 Finance Costs 197 324
81 91 Depreciation and Amortisation 138 211
(91) (179) Loss before exceptional Items (116) (491)
915 (1369) Exceptional Items (net) 1543 (909)
824 (1548) Profit / (Loss) after exceptional items 1427 (1400)
Less: Tax Expenses
- - Current Tax 3 3
135 (68) Deferred Tax (Net) 144 (79)
- - PAT for the year from continuing operations 1280 (1324)
- - Minority Interest 16 7
- - PAT after Minority Interest 1296 (1317)
- - Profit / (loss) from discontinued operations before Tax 0 (7)
- - Tax expenses on discontinued operations - -
- - Profit / (loss) from discontinued operations (0) (7)
689 (1480) Net Profit / (loss) for the Year 1296 (1324)
74 16 Cash Profit / (Loss) for the Year 86 (244)

Note: Figures have been re-grouped wherever necessary to make these comparable

Financial Performance, Key Ratios

FY2021 FY2020 FY2021 FY2020
Profitability Ratios
4.5% 3.3% EBIDTA excluding OI / Net Sales from continuing operations 3.6% (0.08%)
6.2% 5.0% EBIDTA including OI / Net Sales from continuing operations 7.4% 0.9%
(3.6%) (5.6%) PBT (excluding exceptional item) / Net Sales from continuing operations (3.9%) (9.6%)
66.6% NA RONW on total operations* NA NA
10.0% NA ROCE (excluding exceptional items) (terminal) on continuing operations* NA NA
20.8% NA Cash ROCE (excluding exceptional items) (terminal) on continuing operations* NA NA
Per Share Ratios
7.94 (23.61) EPS (Basic) on the basis of total profits from continuing operations (In Rs. Per Share) 14.92 (21.01)
7.50 (23.61) EPS (Diluted) on the basis of total profits from continuing operations (In Rs. Per Share) 14.10 (21.01)
0.85 0.26 Cash (Basic) EPS from continuing operations (In Rs. Per Share) 0.99 (3.89)
0.81 0.26 Cash (Diluted) EPS from continuing operations (In Rs. Per Share) 0.93 (3.89)
Leverage Ratios
0.8 NA Long term debts to equity* NA NA
0.9 0.6 Interest Coverage Ratio for continuing operations 1.1 0.1
Assets Efficiency Ratios
1.5 2.5 Net Sales to gross working capital of continuing operations (times) 1.4 2.7
NA NA Net Sales to net working capital of continuing operations (times)* NA NA
Others Ratios
75 47 Debtors Turnover (no. of days) 73 50
80 46 Inventory Turnover (no. of days) 80 54
0.87 0.37 Current Ratio 0.60 0.32
(8.9) (3.5) Net Profit Margin % (before exceptional items) (8.9) (8.1)


* Figures in the denominator of ratio calculation is negative. Therefore, ratios are not calculated and disclosed as NA. Figures have been re-grouped wherever necessary to make these comparable.

Environment, Health and Safety (EHS)

In view of the COVID-19 pandemic and keeping employee health and safety paramount, CG has issued SOPs to all its employees in accordance with the guidelines of the Central Government, State Government and local authorities. This includes allowing maximum employees to work from home, virtual inspections/audits, providing Company arranged transport from home to work place and return, regular sanitization of work place and transport vehicles, providing masks and other protective gears, thermal scanning, SpO2 checks, providing touch free hand sanitizers, advising regular hand washing, maintaining social distancing at works, in canteens and in the offices, amongst others. Strict compliance is observed in respect of government guidelines for travel, visitors, contractors and vendors. All these precautions have helped to safeguard all CG units and offices from any adverse impact due to COVID.

The Company has also taken up move to ensure 100% vaccination for all employees.

CGs EHS strategies are directed towards achieving the greenest and safest operations across all its units at various locations. All units are encouraged to consistently improve on operational efficiencies, minimize consumption of natural resources, water and energy and reduce carbon emissions while maximizing production volumes.

CG propagates ‘Zero Harm Culture towards employees, environment and other stakeholders. This is reflected in its Corporate EHS Policy and Cardinal Rules. Through its Corporate EHS Policy, the Company aims not only to comply with legal requisites of safeguarding employees, environment and the society at large but also to set high internal standards for compliance. To monitor compliances and sharing best practices in EHS, a Corporate EHS Review is conducted on monthly basis through GoTo meeting with unit heads and EHS coordinators of all entities.

All the CG units are upgraded for ISO 45001:2018 (Occupational Health and Safety Standard). All CG units in India are certified for quality systems with ISO 9001:2015 Certification/ ISO 14001:2015 Environmental Management System Certification, possess consent to operate from State Pollution Control Board Authorities and are complying with the conditions laid down in such consents to operate.

Regular trainings on EHS awareness and sustainable growth are conducted at all manufacturing locations and regional sales offices. National Safety Week and World Environment Day campaigns are conducted under the guidance of Directorate of Industrial Safety and Health and State Pollution Control Board. Fire Safety Weeks are also observed in India under the guidance of the Fire Adviser, Ministry of Home Affairs and the Government of India.

EHS Key Performance Indicators (KPIs) are linked with SMART goals of all units and individuals for their Annual Performance Management process. Quarterly audits are conducted to review the EHS implementation and process compliances across all locations of the Company. Corrective actions generated from these audits and various EHS events are captured and tracked for closure in an online Event Reporting System portal.

CG shall continue its efforts towards conservation of natural resources and focus on achieving highest level of employee health and well-being, for an injury-free workplace.

Human Resources

In FY2021, the impact of cash flow and working capital constraints, subdued business and uncertainty resulted in relatively higher levels of attrition among white collar employees. While the attrition was high, revenue too was substantially lower. Thus, CG followed the policy of not replacing all separated employees, and having existing employees take on greater and multiple responsibilities.

As of 31 March 2021, the Company had 2,570 permanent employees.

CG continued to promote internal talent, wherever possible, to occupy vacant leadership positions that needed to be filled. The Company has always invested in employee development and it continued the same trend in FY2021. CG continued its HR initiatives, albeit at a reduced level, focusing on maintaining employee engagement and building positivity across the organization.

The Company continued to offer regular Behavioural development opportunities to its employees. Programs like ‘Be a Beacon, ‘Build effective Behavioural Patterns, ‘Stay Strong Stay Positive, and other technical programs have seen greater participation from employees and business leaders.

A slew of timely actions were taken on employee safety with respect to COVID-19. Advisory Notes were circulated and followed as per Central and State Government norms. Guidelines were flashed on CG Pulse. Awareness sessions were arranged across units and offices by EHS and HR Co-ordinators. Online weekly Self Health Declaration and real time monitoring of the vaccination status was started through CGHR4U – HRIS Portal.

Post-training surveys are regularly conducted to seek feedback from the participants and respective primary managers on the implementation of learning. Apart from such surveys, the Company also started the practice of reaching out to the learners and their managers after 90 days to understand the implementation journey of learnings. This has encouraged learners to refresh key learning and use these in their day to day job. One key feature of the various development interventions was the use of internal experts and talent to conduct these.

CG Productivity System (CGPS) focuses on enhancement of employee productivity on the shop floor. Certain changes in areas of monthly plant capacity in terms of number of shifts and product mix were introduced. A rerun of the productivity was carried out in several manufacturing units of CG.

At CG, Industrial Relations (IR) set up new benchmarks in FY2021. Despite severe cash constraints and concomitant downsizing, IR remained peaceful with a greater connect between the unions and management.

Information Technology

Technological advancement and rapid digitization are changing business landscape around the world. CG endeavours to use software to aid in design of products and implement or enhance business solutions towards improved business processes. The Company uses software like SolidWorks, AutoDesk, SAP and home grown software like Dealer Portal, OGS, Vendor Portal, Customer Service Portal and so on, across various verticals and support functions. It continues to invest in technologies, update them and strive to improve ROI on these investments.

CGs core IT Infrastructure runs out of a private cloud. This has served the business objectives of optimizing computing resources on demand scalability, and providing round-the-clock reliable and assured systems availability for users in India, Asia and Europe, including work-from-home and remote users.

Leveraging conferencing and virtual meeting tools has enabled business continuity of critical transactions, key operations and other activities — the more so during the lockdown induced by the COVID-19 pandemic.

Across CG, a robust modern IT platform incorporating SAP ECC ERP and BW, leading industrial design solutions like AutoCAD and SolidWorks, and internally developed applications have not only enabled and strengthened various portals but also improved speed, accessibility, data-integrity, process compliance and security.

CG has enhanced its Data Security inner/outer parameters by implementing Cloud Proxy, which gives unrivalled visibility and real-time data and threat protection while accessing cloud services, websites, and private apps from anywhere, on any device.

The Company continued its engagement with prominent IT partners like SAP, Tata Communications, Nxtgen, HP, Canon and others. In the post-Covid scenario, CG intends to increase the use of technology, business intelligence, robotic process automation and adopt an even more agile IT plan.

Corporate Social Responsibility

CGs work on CSR is appended with the Directors Report.

Risk Management

CGs comprehensive Risk Management Framework involves a three-tiered approach, taking into account the following: I. Enterprise Risks II. Process Risks III. Compliance Risks

Enterprise risk identification and mitigation initiatives are handled through an on-going process for each of the businesses, as well as for CG as a whole. The coverage extends to all key business exposures. After getting a measure of each such enterprise risk, the mitigation actions are tracked.

Process risk management involves review of CGs business related operational and financial processes and controls through an Internal audit plan placed before the Board-level Audit Committee. Mechanism exists to track the identified gaps in processes and controls to be corrected through the ‘Audit Observations, in monthly interactions with the Business Heads.

Compliance risk management comprises a mechanism of reporting and assurances with respect to adherence of laws and regulations applicable to CG.

All three dimensions of CGs Risk Management Framework are reviewed annually for their relevance and changes. The businesses and internal auditors make regular presentations to the Board of Directors and Audit Committee respectively for detailed review. Unresolved internal audit observations and associated risks are presented and discussed at Operations Review Meetings as well as at the Audit Committee meetings.

CGs Risk Management Committee comprises of three Directors and one Business Head. The Committee members along with the Senior Executives and Business Heads of the Company carry out a detailed review of risk management practices and evaluate the implementation status of mitigation measures. The identified key risks at the entity level are evaluated and prioritized based on quantitative and qualitative aspects of impact and likelihood for timely decision on its mitigation.

Internal Controls and their Adequacy

Robust internal controls framework is a hallmark of a strong business model. While some of these controls may have faltered in prior years, the present management and the Boards Audit Committee have taken steps to reinforce these controls and put the Company back on a strong footing.

CGsinternalcontrolshavebeendesigned to provide a reasonable assurance with regard to maintaining proper internal controls, mechanism of reporting of non-adherence to internal controls and corrections of the system, processes and controls regularly based on findings and other relevant information.

CG regularly conducts internal audits of various divisions, sales offices, corporate functions and overseas operations driven by the Internal Audit Plan. The internal audit team focuses primarily on operational and systems audits that monitor compliance with the company wide Rules of Procedures for Management (RoP) Delegation of Authority (DoA), adherence to different business specific policies and prudent business practices.

The annual internal audit plan covers key areas of operations. The Audit Committee is periodically updated of the significant internal audit observations, compliance with statutes, risk management and control systems. The Audit Committee assesses adequacy and effectiveness of inputs given by internal audit, and suggests improvement for strengthening internal controls from time to time.

The Company uses SAP as its key data and analytical tool and has also developed an in-house ‘Continuous Auditing tool based on SAP data for regular exception reporting on specific controls within different business cycles. This has helped the business leaders to act on exceptions on a quarterly basis.

Business Outlook

With steady resolution of legacy issues and sustained normalisation of operations, CG is on course to reclaim its strategic position in the marketplace. The fact that most of the customers expressed a sigh of relief on CG coming back with strength tells high about the Companys significance across its operating domains of Power Systems and Industrial Systems including Railways.

Sequential improvements in the Companys quarterly performances indicate a rapid turnaround and the Company appears headed towards profitability and positive cash flows in the coming quarters. Companys added efforts towards all round capability ramp up across - customer engagement, operational efficiency, market development, talent, innovation, digitisation – is likely to serve it well, more so in view of the added demand for CGs products and solutions that the opportunity landscape is brimming with.

Indias GDP growth forecast of 9.5% and 8.5% for FY2022 and FY2023 respectively augurs well for the capital goods sector. ‘Make in India, for the World vision is being backed by an ambitious PLI (Production Linked Incentive) scheme, both of which shall add wings to the manufacturing sector. Bold reforms in the power sector (distribution centric) shall go a long way in fixing its weakest link. New target of 450 GW of Renewable Energy by 2030 is likely to create immense investments across power generation, transmission and distribution. ‘Gatishakti multi-modal logistics program is going to create significant new opportunities across the whole of transportation sector.

In the view of above enabling factors, business outlook of CG appears quite positive and promising. Structural strengthening of its corporate governance, fiscal prudence and risk management framework, all of which are work-in-progress as of now, would solidify its business foundations, resting on which CG can become a formidable force in the Indian Capital Goods segment by the turn of this decade.

On behalf of the Board of Directors

Vellayan Subbiah
(DIN: 01138759)
Mumbai, 31 December 2021