A. Overview
Managements perspective on the financial condition and the operational performance of
the Financial Year 2014- 15 is explained below. The following discussion of the Companys
financial condition and result of operations should be read in conjunction with the
Companys financial statements, schedules and notes thereto and the other information
included elsewhere in the Annual Report. The Companys financial statements have been
prepared in compliance with the requirements of the Companies Act, 2013, guidelines issued
by the Securities and Exchange Board of India (SEBI) and the Generally Accepted Accounting
Principles (GAAP) in India.
B. Macroeconomic Environment
Indian economy is going through times. The Power sector has witnessed the worst ever
slow down in the recent past. Other sectors which also showed slowdown are steal, dis-com
and highways.
Persistent uncertainty in the global outlook, caused by the crisis in the Euro area and
general slowdown in the global economy, compounded by domestic structural constraints and
inflationary pressures, resulted in a protracted slowdown. The country is witnessing the
worst ever slowdown in the recent past in the infrastructure and Capital goods sector.
With the Governments initiative of Make-In- India the investment climate is likely to
improve and the overall macroeconomic environment will show signs of growth more so due to
expected infrastructure projects and unleashing of stalled projects. Industry is expected
to revive and growth can accelerate gradually over the next two years.
C. Industry Scenario
The US-based industrial classification of IIP estimates identifies the capital goods
segment as the weak performer in the manufacturing sector. The capital goods segment has
been hit by the steady deceleration in fixed investment in the past three years. The slow
pace of mega projects implementation and a decline in the number of new projects has
adversely impacted the capital goods segment.
The power sector was growing phenomenally from 2010 onwards with many private power
producers getting license to set up small and medium size power plants. The demand of Air
Cooled steam Condensers for thermal power plants increased and it was found to be
revolutionary in terms of water saving as compared to conventional water cooled steam
condensers. Looking into the increased demands of Air Cooled Steam Condensers we invested
in the plant, machinery, manpower and allied resources. GEI received orders of these
Condensers for plant capacities up to 150 MW and executed orders for four such units.
It was during the same time that the slow down started in the power sector due to
shortage of coal as a result of the coal scam, dis-com pricing, environmental clearances
and gas pricing issues. The trouble deepened with RBI issuing advisory to the banks to go
slow on the Companies exposed to the power sector. As a result of this, fund inflow into
the projects got delayed and the projects in the private sector got stalled due to the
accounts becoming NPA.
We were also hit badly in this process as huge amount of receivables got held up with
majority of the clients in the power sector. The cash flow got severely affected and the
Company went into financial strain.
With the new initiative of Make-in-India by the Government of India the market is
showing few good signs and projects are getting cleared. With the re-allocation of the
Coal Blocks based on the Supreme Court directives we are hoping that availability of Coal
should not pose problem for the power producers. We have started receiving fresh request
for quotations for new and upcoming projects and finding it difficult without a valid
certificate for ISO 9001:2008.
Strategy
Your company has worked out a multi-pronged strategy to overcome the crisis that has
engulfed the whole sector. The strategy can be summed up as follows:
I- Focus on exports - Even when Indian market stagnated, global market has been growing
robustly. A diversified market-base in geographic terms can safeguard the company against
future shocks.
II. Oil & Gas Sector - The crisis of past two years has been primarily a crisis of
new thermal power plants. Your company is focusing on oil and gas companies to offset the
shocks from the thermal power sector.
III. Nuclear Power - Nuclear power sector in India is growing fast after the
bottlenecks faced by rhe sector have been removed in the wake of Indias nuclear treaties
with various countries. Your company has undertaken technological challenges to develop
new products for this sector. Nuclear Power Corporation of India Ltd. has already
recognized your companys significant work in the field.
IV. Technological Innovations - Your company is firmly of the belief that the best way
to face tough challenges is by new innovative products. The company has been working with
its clients to develop import substitution products which are expected to add
substantially to the companys bottom-line in the years to come. Some of these products
will be introduced for the first time in India and thus will also contribute to the
technological progress of the country. Discussions are on with few leading technology
providers which will pave way for the Company to enter into new areas with a perspective
for growth in future using companies core competence.
D. Outlook
Your company is hopeful that the strategy adopted by it combined with support from the
banks and financial institutions (who have always stood with the company) will help the
company to revive itself and come out of the crisis which had been caused by the negative
developments in economy in general and new thermal plants in particular. State Bank of
India, IDBI Bank and Axis bank has already restructured the banking facilities, the
bilateral documentation has already been executed and facilities implemented. The
turnaround process is expected to show first visible signs in the second half of year
2015-16 with significant results in the financial year.
Your company is operating in three sectors such as Petroleum Refining, Oil & Gas
and Power. With scarcity of water and policy makers push for water conservation demand of
Air Cooled Vacuum Steam Condensers for sub-critical and super critical thermal power
plants are going to increase in a big way. Your Company is also actively considering
entering into Super Critical Water Oxidation system (SCWO) drawing companys experience in
the Waste Management and up gradation Plant of Nuclear Power Project. SCWO is an
environmentally safe method for disposal of organic waste and has got wide application in
Petroleum, Petrochemical and Fertilizer sector. This product will be manufactured using
the existing state of the art facilities in the company. Discussions on technological tie
up are in the advanced stage. With the new strategy of serving different sectors in India
as well as globally, your company is confident of not merely coming out of the present
crisis but also in its ability to withstand any future shocks.
E. Risks. Opportunities and Threats
Your Company is aware of the risks and concerns likely to affect its operations such as
political and economic disturbances in the form of structural changes, policies and
procedures or unexpected economic down turn etc. In particular, the Company has realized
that it should broaden its markets both geographically as well :: in terms of industry
segments. The Companys strategy mentioned above takes into the need for risk mitigation.
In order to be in a state of constant preparedness to face risks, the Company has
identified key risks and the remedial actions to be initiated on their emergence through a
well documented procedure. The risk management system is critically evaluated on a
continuous basis and changes are made considering the dynamics of the industry, markets
and the prevailing economic situation.
Your Company is optimistic about the growth of Indian economy during the next five
years. Economic growth cannot happen without large investments in the sectors in which
your Company is operating. The investments are likely to throw up significant
opportunities, which your Company is well prepared to benefit from.
F. Internal Control Systems
Your Company has a separate internal audit department headed by a qualified
professional that is responsible for internal control systems and their adequacy. The
Company has well researched and documented system to ensure adherence to standard policies
and procedures of the Company in all its operations and functional areas.
G. Human Resources
The most important aspect of the Companys business is its emphasis on human resources
as the core of its operations. The emphasis on employees pivotal position in the
organisation manifests itself in various forms such as employee engagement, evaluation,
training & development, rewards, welfare schemes etc. This harmonious integration of
management thinking and employee response has ensured that the industrial relations
remained cordial throughout the Companys existence, an achievement the management is
quite proud of.
H. Cautionary Statement
Statements in the Management Discussion and Analysis describing Companys
projections, estimates, expectations or predictions may be viewed as forward looking
statements within the meaning of applicable security laws and regulations. Actual results
could differ materially from those expressed or implied. Important factors that may make a
difference to the Companys operations include demand & supply conditions, raw
material prices, changes in Government regulations, tax regimes, economic developments
within the country and abroad, and similar other factors.
C E Fernandes
Chairman & Managing Director
+91-9892691696
