EASUN REYOLLE LIMITED
ANNUAL REPORT 2011-2012
MANAGEMENT DISCUSSION AND ANALYSIS
Macro Economic Picture (India and Global)
During the past couple of years, the Electrical Industry in India has been
showing some signs of a lull, though the long term outlook remains
optimistic and bright. With weakened investment climate and tightened
capital market, the growth of electrical industry has further slowed down
during the year under review.
The Industrial growth slowed significantly in 2011-2012 on account of
weakened domestic demand and lower GDP growth, accompanied by high interest
rates, worldwide recession, and consequently a subdued investment climate.
Surplus capacities in several sectors resulted in low utilization and
resulted in severe margins pressure. Delays in achieving financial closure
of various infrastructure projects and continued poor financial position of
most of the electrical utilities in India has impacted the performance of
electrical industry resulting in carrying higher receivables working
capital and higher interest expense, cost overruns in project operations.
Globally, the scenario is more or less the same with subdued growth, tight
money conditions and uncertain economic scenario.
Performance analysis of the company:
Your company has achieved a modest growth in India, in spite of various
economic factors as detailed above and maintained its market share in most
of its business verticals. It continued to keep pace in the technological
development of its product line which will lead to reducing its dependence
on third party products and improving its margins. While the EBIDTA has
grown substantially (33%), substantial long term borrowings towards capital
investments have resulted in higher interest costs, affecting the pre-tax
profits; lower tax implication has resulted in a marginal increase at the
During the year under review, your company has completed construction of a
world class facility at Harohalli (Bangalore) as a Global manufacturing
base to address the needs of the new products to be introduced from its
German subsidiary and also facilitating the backward integration of its
manufacturing process in India. The Harohalli Factory has commenced
commercial production effective from 1stJuly, 2012. Another milestone
achieved is receipt of a large order (Rs. 167 crores) from Madhya Pradesh
Electricity Distribution Companies.
ERL Phase Power Technologies Ltd, Canada, has shown an impressive growth in
sales (47%) during the year and also for the first time achieved positive
bottom line. It has completed the development of a range of Protection
relays aimed at the transmission segment on a state-of-the-art platform and
these products have been introduced to the North and Latin American markets
during the year. They are expected to be introduced into the Indian and the
global markets from the first quarter of the next financial year.
The German Subsidiary, Switchcraft Europe GmbH has made significant
progress in developing new range of Switchgear products. The Company has
introduced the Ring Main Units into various global markets successfully and
is looking to achieve significant business volumes in the financial year
2012-13. The company has successfully completed all critical tests for the
24kv Switchgear market as required, and is in the process of completion of
tests for the 36kv Switchgear market. This Product is a leader in its
segment and the company has high hopes of achieving significant
breakthrough in the market.
ERL MINT has more than doubled its business volumes during the year and has
moved into the profit zone. It has a large number of offers under active
consideration from its customers and is hopeful of achieving a substantial
growth in top line and in profits during the financial year 2012-13.
Availability of number of new technology products at overseas markets in
the near future underscores the potential for substantial business growth
in the coming years.
While the Indian economy and the power sector in particular are currently
showing lack luster growth, your company will be focusing on improving
internal efficiencies, reduction of debtors and reducing the input costs
and expenses, as well as safeguarding market share in various business
segments. Commencement of commercial operations of global manufacturing
facilities is expected to bring a substantial impact in this direction.
While EBIDTA margins will improve as a result of various initiatives
underway, it has to be borne in mind that the company will have to bear the
additional interest and depreciation costs from the current financial year.
However, these will be offset by the growth in the business volumes - both
in India and internationally.
Preparation of Financial Statements in consonance with revised Schedule VI
of the Companies Act, 1956
Company has prepared and presented the Financial Statements for the year
under review in accordance with the revised Schedule VI of the Companies
Act, 1956, as notified by the Ministry of Corporate Affairs. Accordingly,
previous years figures have been regrouped / re-stated wherever necessary
to conform to the classification in the current year.
Subsidiary Companies and Consolidated Financial Statements
There has been no material change in the nature of the business of the
In accordance with the Statement of Accounting Standard on Consolidated
Financial Statements (AS 21) issued by the Institute of Chartered
Accountants of India, Financial Statements of Companys subsidiaries have
been considered in the accompanying Consolidated Financial Statements of
the Company. As per guidance given in the circular issued by Ministry of
Corporate Affairs, the Board of Directors has consented for sending annual
financial accounts of the company without attaching the Balance Sheets of
the subsidiary companies. Shareholders who wish to have a copy of the full
report and accounts of the subsidiary companies will be provided on receipt
of a written request from them. The above documents will also be available
for inspection by any shareholder at the registered office of the Company
as well as registered office of the subsidiary company, on any working day
during the business hours.
Human Resource Development
During the year under review, your Company continued to have cordial
relations with all employees at all the units. The Company recognizes the
importance of human capital and strives to enrich professional and
technical skills within the organization. Your Directors recognize the
teams valuable contribution and place on record their appreciation for the
employees across the organization.
Employee strength as on 31st March 2012 was 398 as compared to 432 in the
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