Economic Outlook and Prospects
2016-2017 marked an another difficult year for the world economy, with growth lowering
to 2.3 percent (from 2.7 percent). The year was characterised by stagnant global trade,
subdued investment and heightened policy uncertainty. In the year gone by, there was
deceleration of growth in advanced economies (1.6 percent, down from 2.1 percent, the
previous year) and in the emerging and developing economies. Economic growth in both the
US and Europe was at a lower level, compared to the previous year. Chinas growth
continued to be slow, close to 7 percent, far below its earlier annual growth rates.
Investments slowed down there due to overcapacity in nearly all sectors, resulting in
sluggish industrial production. Weak investments and sluggish productivity affected many
emerging markets and advanced economies, resulting in muted growth.
The IMF update for January, 2017 predicts likely pickup in economic activities in 2017
and 2018 after a lackluster out turn in 2016, especially in emerging markets and
developing economies. Global growth for 2016 is estimated at 3.1 percent. For 2017 and
2018, growth is projected at 3.4 percent and 3.6 percent respectively.
Since the onset of global financial crisis, global economy is still struggling to
revive and grow at a healthy rate. A large number of political and economic disturbances
have been witnessed over the past one year, from uprisings in the Middle East, economic
turmoil in Euro Area and Brexit. Volatility in commodity prices and general uncertainty
has impacted business environment across the globe and recovery pace in both mature and
emerging markets. The crisis has produced a wide-ranging yet differentiated impact across
the globe which includes economic slowdown and contraction in world trade.
Slowdown of global growth continues, creating an obstacle to fulfillment of the
Sustainable Development Agenda of 2030. World gross product is projected to expand only by
2.4 percent in 2016, the same weak rate as in 2015. This reflects significant downward
revisions in growth for several countries in Africa, the Commonwealth of Independent
States (CIS), and Latin America and the Caribbean from the forecasts in December 2015.
Persistent weakness in aggregate demand in developed countries continues to dampen global
growth, while low commodity prices, mounting fiscal and current-account imbalances and
policy austerity have further decreased the growth prospects of many export oriented
countries. This weakened growth prospects have been further aggravated by severe
weather-related shocks, political challenges and large capital outflows in many developing
regions.
Downside risks to the global economy remain elevated against the backdrop of weak
demand, low investment, low commodity prices and financial market turbulences. Divergent
global inflationary pressures have prompted pro-cyclical monetary tightening in several
developing countries, in contrast to additional monetary easing in the euro area and
Japan, and delays in interest-rate rises by the United States Federal Reserve. Increased
divergence in global interest rates may intensify capital flow volatility and
exchange-rate pressures in developing countries. Greater policy coordination among
countries can lower the impact of negative spill over effects from policy misalignment and
contain financial market volatility. There is also need for reducing dependency on
monetary policy by exploring available fiscal space and additional policy measures to
enhance global growth.
Overview of Indian Economy
In the backdrop of global slowdown and lower world demand, India witnessed steady
growth momentum in comparison to other developing world economies.
According to the Projection by IMF for India in its World Economic Outlook (WEO),
October 2016, Indias GDP will continue to expand at the fastest pace among major
economies, with growth forecast at 7.6 percent in 2016-2017. As per UN in its World
Economic Situation and Prospect (WESP) report, Indias economy is slowly gaining momentum,
with an expected GDP growth of 7.3 and 7.5 percent in 2016 and 2017, respectively.
According to OECD Interim Economic Outlook, September 2016, Indias projected GDP growth
is 7.4 percent for 2016 and 7.5 percent for 2017. Various reforms are expected to ease
domestic supply bottlenecks and increase productivity. Infrastructure spending should
improve the business environment and attract FDI. The "Make in India" initiative
can support Indias manufacturing sector, backed by boosting domestic demand and further
regulatory reforms. Moderate inflation and a civil service pay hike should enhance real
incomes and consumption, helped by good harvests after favourable monsoon. A benefit of
‘demonetization in the medium run may ease liquidity in the banking system, leading
to lower lending rates and boost economic activity (World Bank, Global Economic Prospects,
January 2017).
The growth momentum should rise, driven by the Governments policy initiatives in areas
such as taxation (GST), foreign direct investment (FDI), and the ease of doing business,
among others Other major factors helping India stay as a bright spot in the global
economic landscape include the lower global oil price, with positive impact on the
countrys import bill, a well-regulated monetary policy by the Reserve Bank to stabilise
prices, and improving fiscal condition. The Governments endeavour to drive a bigger as
well as a cleaner GDP is expected to augur well for the economy in the medium and long
terms.
The growth recovery has primarily happened due to discretionary spending, public
investment and FDI reforms. The introduction of GST and higher outlays in the Budget 2017
are expected to drive growth as well.
According to the Global Competitiveness Report 2016-2017 of the World Economic Forum,
despite unorthodox monetary policy, global GDP growth has fallen from levels of 4.4
percentt in 2010 to 2.5 percent in 2015. India leads the group of South Asian economies,
climbed back up the rankings to 39th in this edition of the Report, from 48th in
2007-2008. Indias competitiveness has improved across the board, in particular in goods
market efficiency, business sophistication, and innovation. Health and basic education
improved throughout the decade. Improvement in infrastructure, by contrast, was small and
faltering during most of the period, but picked up after 2014 when the government
increased public investment and sped up approval procedures to attract private resources.
Macroeconomic conditions followed a similar path, as India managed only in recent
years-thanks also to the drop in commodity prices to keep inflation below the target of 5
percentt while rebalancing its current account and decreasing public deficit.
Two most significant improvements are in the areas of infrastructure and in health and
primary education. For example, India almost halved its rate of infant mortality.
Structural issues such as energy shortages, low participation of women in the labour
force and lack of infrastructure remain major regional hurdles.
Inflation is projected to remain relatively low, reflecting subdued commodity prices
and lower pressures from supply-side bottlenecks. This has increased monetary policy
space, with prospects for further easing in India. Overall, the positive outlook will
enable further gradual progress on poverty reduction. The regional prospects are
contingent on robust growth in India. Despite some delays in domestic policy reforms and
enduring fragilities in the banking system, investment demand is supported by the monetary
easing cycle, rising FDI, and government efforts towards infrastructure investments and
public-private partnerships. According to latest WTO estimates, world trade will grow more
slowly than expected in 2016, expanding by just 1.7 percent, well below the April forecast
of 2.8 percent. The forecast for 2017 has also been revised, with trade now expected to
grow between 1.8 percent and 3.1 percent, down from 3.6 percent previously. With expected
global GDP growth of 2.2 percent in 2016, this year would mark the slowest pace of trade
and output growth since the financial crisis of 2009.
India, buoyed by low oil prices, remained the fastest growing major economy in the
world (growth estimated at 7.1 percent). For the Indian economy, 2016-2017 was marginally
better than the previous year. The first eight months of the fiscal saw momentum picking
up on the growth front. However, as demonetisation lowered aggregate demand, gross value
added growth, earlier estimated to touch 7.6 percent, was revised to 7.1 percent for
2016-2017.
Capex in core sectors continued to be low as many private sector companies have
excessive borrowings on their balance sheets and the banking sector is saddled with large
NPAs. This has affected both steel and power sectors. Low capacity utilisation in the
cement sector and surplus power generation delayed new capex in these sectors. However,
capex in consumer oriented industries registered faster growth, with both foreign entities
and domestic companies initiating the setting up of new capacities.
The energy sector, the world over including India, is in a state of flux with several
factors contributing to the disruption of familiar patterns. Oil and gas prices remained
low, eroding the arbitrage for biomass based projects. Solar PV prices have crashed, both
in terms of project cost and per kWh costs, providing stimulus for a shift to renewable
energy. This development has also dampened the prospects of investments in coal based
power plants. Further, the recently announced National Electricity Policy doesnt envisage
any new ordering of coal based power plants during the period, 2017-2022. These will have
far-reaching significance for the companys business segments.
The various Business Segments of interest areas of your company are listed below:-
MINERAL
India currently produces around 89 minerals under different groups, with fuel minerals,
metallic minerals, non-metallic minerals, atomic minerals and minor minerals. The country
has immense potential for mining resources and reserves and is currently among the top ten
global producers of many minerals.
The public sector contributes over 85 percent of the total value of mineral production.
However, it is the avowed policy of the Government to withdraw from the non-strategic
sectors and accordingly the public sector undertakings are being privatised in a phased
manner. Public sector enterprises like the National Mineral Development Corporation,
Kudremukh Iron Ore company, Steel Authority of India Limited and Orissa Mining Corporation
dominate the iron ore sector. National Aluminium Company contributes about 35 percent
bauxite mining and aluminium production. Hindustan Copper Limited predominates the copper
ore mining sector. After cessation of economic operations in Bharat Gold Mines Limited
since 2000, Hutti Gold Mines Limited (a Government of Karnataka undertaking), is the only
undertaking engaged in the mining of gold. Rajasthan State Mines and Minerals Limited and
Andhra Pradesh Mining Development Corporation predominate the mining of rock phosphate and
barytes respectively. In Private sector, Vedanta Resources is one of the main company who
has taken over of government undertakings like Hindustan Zinc Limited and Bharat Aluminum
Co. Limited and also have their own alumina refineries in Jharsuguda and Lanjhigarh.
NMDC - Iron Ore Beneficiation Plant:- Design, engineering, Supply, Erection ,
Commissioning and demonstration of Performance parameters for 1.89 MTPA capacity Iron Ore
Slimes and fines Beneficiation plant complete with all auxiliary systems, water supply
system and Fire fighting system at NMDCs Donimalai Plant in Bellary District , Karnataka.
(Built by HDO)
HDO is predominantly active in the area of mineral beneficiation in Alumina, Uranium,
Iron Ore, Coal, Zinc and Copper. The sector is at present under stress due to global
meltdown in Metal prices. There are also severe restrictions from Indian Government on
mining due to environmental concerns.
However the market conditions are slowly improving and the revival is expected very
soon. There are several expansion plans in the mineral industry which are getting revived.
Companies like NALCO, UTKAL, VENDANTA, NMDC and SAIL have declared their expansion plans
and once the market is revived, HDO will have substantial opportunities in this segment.
FERTILIZER
The roll-out of comprehensive Urea Policy by the Government is expected to revive
Public Sector urea plants at Gorakhpur, Sindri, and Barauni. Energy efficiency improvement
projects are being actively pursued in existing fertilizer units. major opportunities
include revival of sick FCI and HFCL units, energy saving and capacity enhancement
projects driven by New Urea Policy 2015 (NUP 2015). The fertiliser sector also is set for
capacity expansion.
Countrys "urea production could reach record 25 million tonnes in the next
financial year, at the same time, imports could also come down by 1.5 to 2 million tonnes
with the help of policy initiatives like neem coating of urea and new urea policy.
India produces about 22 million tonnes of urea annually but has to import 7-8 million
tonnes a year to meet the domestic demand.
The year also saw the central government approving revival of three closed urea plants
and setting up of a new one at a cost of about Rs 22,500 crore. No new fertilizer plant
has come up in the country in the last 15 years.
Indian Phosphatic Fertilizer market stood at nearly USD15 million during 2016 and is
expected to showcase growth at a CAGR of 3.6 percent, exceeding USD 20 million by the end
of 2026. Owing to the falling prices of phosphate inputs such as phosphoric acid, rock
phosphate, etc., the demand for phosphatic fertilizers is increasing steadily in the
country. In addition to this, the rising concerns and focus on the soil health is driving
wide adoption of phosphatic fertilizers among the Indian farmers. Moreover, various
initiatives by government such as Indias subsidy policy aimed at improving the purchasing
power of fertilizers would escalate the overall consumption of phosphatic fertilizers in
the country through 2026.
Indian Phosphatic Fertilizer market is controlled by these major players, namely–
IFFCO, Coromandel International, GSFC Ltd., Paradeep Phosphate Ltd., Khaitan Chemicals
& fertilizers, Indian Potash Ltd., KRIBHCO, HINDALCO, The Phosphate Company Limited
and Rama Phosphates Limited among others.major Indian phosphatic fertilizers companies
like KRIHBCO, Vendanta – Tuticorin, Paradeep Phosphates etc have expansion plans for
2017-2018 and augmentation of Phosphoric acid capacities.
HDO is predominant in the business of Phosphatic fertilizer and Phosphoric acid
projects and enjoys leadership position in this segment should be well poised to explore
the new opportunities in this field. HDO is also exploring strategic partners in place to
take up Urea based fertilizer projects and expand business segment.
WATER AND EFFLUENT TREATMENT
Business Environment
The per capita water availability in the country is rapidly decreasing due to an
increase in population and its consumption. The average annual per capita availability of
water in India was 5177 cubic meters in 1915, which decreased to 1500 cubic meters as per
the 2011 census. It was estimated that by 2015, the per capita availability would go down
further to 1100 cubic meters.
The Government of India has plans to prevent the contamination of surface water bodies
by stopping untreated wastewater flowing into these bodies. It also plans to adopt modern
irrigation techniques so that the dependency on monsoon can be reduced.
Industries are planning to recycle and reuse their effluent by adopting advanced
treatment technologies thereby reducing the consumption of fresh water requirement for
their day to day processes.
Water Treatment : CIDCO 70 MLD : Designing, Providing, Construction, Erection and
Commissioning of 70 MLD Capacity PLC operated Sewage treatment plant (STP) including O and
M for 5 years to treat domestic raw sewage, including facilities for Sludge digestion,
Sludge Dewatering, etc with our own design and SBR technology / Activated Sludge
Technology. (Built by HDO).
Significant Initiatives
With huge opportunities in integrated water supply prospects, sewage and effluent
treatment space, significant initiatives have been taken to ensure that water business of
HDO to continue to remain competitive in terms of market share and remain as one of our
core business segment.
Some of these initiatives needed :-
Foray into Specialized WTP and Desalination with technology partnerships.
Focus on Zero Liquid Discharge (ZLD) process along with combined effluent treatment
packages in various states and industries across India
Focus on Upcoming medium to large scale STP tenders which will improve the quality of
urban life.
Outlook
There are mega government policies to drive water infrastructure in India that include
AMRUT (Atal Mission for Rejuvenation and Urban Transformation), Namami Gange, Pradhan
Mantri Krishi Sinchayee Yojana and Delhi Mumbai Industrial Corridor Development. In
addition, large investments have been proposed by multi-lateral funding agencies for water
supply and sewer projects to improve the urban quality of life. Desalination and Water
Management projects are likely to fructify during the current year due to the prevailing
water stress conditions in most parts of India. Mega lift irrigation projects have been
proposed across major states along with proposals to connect rivers with 15,000 km of
canals. To this effect the Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) has been
formulated with the vision of extending the coverage of irrigation ‘Har Khet ko pani
and improving water use efficiency ‘More crop per drop in a focused manner with end
to end solutions on source creation, distribution, management, field application and
extension activities. The Government has already set in motion an integrated Ganga
conservation plan-‘Namami Gange which envisages investments for sewage
infrastructure across several urban habitations along the river. Stringent implementation
of pollution norms is in place to encourage setting up of common effluent treatment
plants. The Delhi-Mumbai Industrial Corridor (DMIC) is Indias most ambitious
infrastructure programme aiming to develop new industrial cities as ‘Smart Cities
and converging next generation technologies across infrastructure sectors. The programme
envisages development of infrastructure linkages like power plants, assured water supply,
high capacity transportation and logistics facilities.
HDO is one of the key player in water segment having successfully executed order in all
the key areas such as Raw water treatment, Effluent water treatment, Sewage water
treatment, Desalination plant, Reverse osmosis plant, Ultra filtration and DM Water
supply. HDOL will be hugely benefitted with the growth potential in water segment.
OPAL-Dahej:- Design, engineering, Supply, Erection, Commissioning and demonstration of
Performance parameters for Effluent Collection and Treatment system Package for Dahej
Petrochemical Complex at Dahej, Gujarat. (Built by HDO).
NUCLEAR
NPCIL
With the formation of Nuclear Power Corporation of India Limited in 1987 as a Central
Public Sector Enterprise under the aegis of Department of Atomic Energy in India, the
nuclear power generation moved to the commercial domain. NPCIL is operating the atomic
power stations and implementing the atomic power projects for generation of electricity in
pursuance of the schemes and programmes of the Government of India. At present, NPCIL
operates 21 Nuclear Power Plants (20 NPPs owned by NPCIL and RAPS-1 (100MW) owned by DAE)
with an installed capacity of 5780 MW. 1000 MW capacity (KKNPP-2) is in advanced stage of
commissioning, 2800 MW capacity (KAPP-3 and 4 and RAPP-7 and 8) are under various stages
of construction and 3400 MW capacity (KKNPP-3and 4 and GHAVP-1 and 2) is under launch for
which administrative approval and Financial sanction from Government is available.
New Sites
The land acquisition is in advanced stage at Chutka site in Madhya Pradesh and Mahi
Banswara site in Rajasthan. As regards Chutka, Rehabilitation and Resettlement (R and R)
package is announced. The public hearing was already held and Environmental Impact
Assessment (EIA) report is under review by MoEF&CC. In respect of Mahi Banswara, the
work of identifying land for R&R colony has been commenced by the District
Administration. Terms of Reference for carrying out EIA study has already been approved by
MoEF&CC and first, second and third seasons environmental baseline monitoring at site
has been completed and reports are under review. For Kaiga-5&6 site, the approval of
Terms of Reference is awaited from MoEF & CC. NPCIL is continuing the process of land
acquisition by interacting with respective State Governments to acquire land at Kovvada in
Andhra Pradesh and Mithi Virdi in Gujarat as per the provisions of RFCTLARR Act, 2013.
GOI has approved annual budget allocation of Rs 3000 crore for expansion of Indigenous
Programme viz. Kudankulam 5 and 6 and PHWR projects. On foreign technology LWR project
opportunities will be in the year 2018-2019.
The 16 PHWRS and LWRs (Light water reactor) are expected to cost $40 billion. The eight
700 MWe PHWRs would be built at Kaiga in Karnataka, Gorakhpur in Haryanas Fatehabad
District, Banswada in Rajasthan, and Chutka?in Madhya Pradesh.
HDO is presently executing various projects worth Rs 300 Crores for NPCIL such as Field
Instrumentation, Waste Management Package and several manufacturing orders for pressure
vessels/columns and Heat exchangers.
Nuclear sector provides potential of executing various EPC packages in
Electro-Mechanical, Piping, Waste treatment segments in the next 4–5 years for your
company thereby providing immense business opportunities in services and equipment
manufacturing for our factory.
IOCL- Paradip:- Residual Basic Design, Engineering, Procurement, Supply, Fabrication,
Inspection, Transportation, Storage, Construction, Installation, Testing, Commissioning,
Startup and Performance Guaranteetest run of DM water and Condensate Recovery System for
Paradip refinery Project of M/S.Indian Oil Corporation Limited at Paradip, Orissa. (Built
by HDO)
Manufacturing Business for HDO
Overview:
The Manufacturing business segment fabricates and integrates custom designed,
engineered critical equipment and systems to core sector industries like Fertiliser,
Refinery, Petrochemical, Chemical, Oil and Gas, Thermal and Nuclear Power applications.
The business has a track record of executing large size and complex projects with
capabilities that include in-house engineering, equipped fabrication facilities, an
experienced project team and safe work culture. The manufacturing business segment caters
to following market segments: ? Process Equipment Division
HDO has range of equipment and systems in field of solid Liquid separation which are
used in all the major areas like Mineral, Chemical, Fertiliser, Pulp and Paper and
Environment. These equipment are of proven design and working over several years. HDO gets
repeat orders and also orders for spare parts. Pulp and paper Industry is gradually
looking up and medium size mills will go for expansion. Companies like Ruchira Paper,
Shreeyansh, etc have expansion/revamp plans offering business opportunities to HDO for
process equipment orders.
? Pressure Vessels and Heat Exchanger Vessels (PVHE) :-
HDO is involved in manufacturing of large complex equipment such as hydro-processing
reactors and high pressure heat exchangers, reaction columns, autoclaves, pressure vessels
for process plants for Nuclear, Hydrocarbon and Oil and Gas Industries. Heavy
manufacturing is undertaken at work centre located in Ahmedabad. Precision fabrication in
stainless steel and titanium on process plant side is handled from this manufacturing
facility. The domestic sectors in the fields of nuclear are expected to grow in coming
years. ‘Make in India campaign is also likely to have positive impact on domestic
manufacturing sector.
The Indian Public Sector refineries are embarking on upgrades to comply with BS-VI
emission norms though the mode of execution is expected to evolve over the period. These
refineries also have investment plans for integrating petrochemical projects along with
refinery upgrades, which will offer business opportunities to Water and waste water
opportunities as well as Process Equipment Business for factory. Thanks to Bharat VI
requirements, refineries have initiated upgradation of their facilities and this augurs
well for your companys business.
HDO is regularly supplying pressure vessels/columns and Heat exchangers to major Indian
Refineries such as IOCL, BPCL, HPCL, CPCL, MRPL, ONGC, GAIL etc and enjoys good market
share. HDO is also major suppliers of equipment to Nuclear and Fertilisers Industries and
expect good opportunities in the coming years.
IOCL – Paradip:- Residual Basic Design, Engineering, Procurement, Supply,
Fabrication, Inspection, Transportation, Storage, Construction, Installation, Testing,
Commissioning, Startup and Performance Guaranteetest run of DM water and Condensate
Recovery System for Paradip refinery Project of M/S.Indian Oil Corporation Limited at
Paradip, Orissa. (Built by HDO).
HDO - Company Performance
Company continues to be beleaguered by the financial constraints in execution of the
ongoing projects. Several of the key projects under execution are in final stage of
completion and needs final push to successfully complete the projects. The completion of
these key projects will help in establishing new credentials in sectors of Environmental,
Nuclear and Mineral sectors. It will also help in reducing the bank liabilities by getting
the various bank guarantees given on these projects released.
Several new prospects in Manufacturing, Environmental and Nuclear power, Water and
Waste water sector are visible in near future and your company being one of the key player
in these sectors should be largely benefitted.
Financial Review
The financial statements of the company have been prepared in accordance with Indian
Accounting Standards notified under the Companies (Indian Accounting Standards) Rule, 2015
("Ind As"). The Company has prepared its financial statements up to the year
ended March 31, 2016 in accordance with generally accepted accounting principles in India
including accounting standards read with Section 133 of the Companies Act, 2013 notified
under Companies (Accounting Standards) Rule , 2006 ("Previous GAAP"). These are
the Companys first Ind AS financial statements. The date of transition to Ind AS is April
01, 2015.
The following table sets forth the Income statement for the financial year ended March
31, 2017 and previous financial year ended March 31, 2016. The components of expenses have
been expressed as a percentage of total income for the period indicated.
| Particulars |
For the year ended March 31, 2017 |
For the year ended March 31, 2016 |
| Net income from operations |
870.56 |
2,053.82 |
| Other income |
85.16 |
40.45 |
| Total income |
955.72 |
2,094.27 |
| Cost of material/services consumed |
726.96 |
1,816.55 |
| Cost of material/services consumed as a percentage to total income |
76.06% |
86.74% |
| Employee benefit expenses |
152.06 |
180.70 |
| Employee benefit expenses as a percentage to total income |
15.91% |
8.63% |
| Other expenses |
196.69 |
211.82 |
| Other expenses as a percentage to total income |
20.58% |
10.11% |
| EBIDTA |
(119.99) |
(114.80) |
| EBIDTA as a percentage to total income |
(12.55%) |
(5.48%) |
| Finance cost |
2,135.18 |
1,801.18 |
| Finance cost as a percentage to total income |
223.41% |
86.01% |
| Depreciation |
4.90 |
6.00 |
| Depreciation as a percentage to total income |
0.51% |
0.29% |
| Profit/(loss) before tax and exceptional items |
(2,260.07) |
(1,921.98) |
| Exceptional items |
2,463.17 |
- |
| Profit/(loss) before tax |
(4723.24) |
(1921.98) |
| Profit/(loss) before tax as a percentage to total income |
(494.21%) |
(91.77%) |
| Profit/(loss) after tax |
(4723.98) |
(1935.61) |
| Profit/(loss) after tax as a percentage to total income |
(494.28%) |
(92.42%) |
| Total comprehensive income for the period ( comprehensive profit/loss) for the period
(after tax) and other comprehensive income (after tax) |
(4725.09) |
(1932.84) |
+91-9892691696
