Indo Tech Transformers Ltd Management Discussions.


This report contains forward-looking statements which may contain certain statements describing the Companys objectives, expectations or forecasts that appear to be forward-looking within the meaning of applicable securities laws and regulations while actual outcomes may differ materially from what is expressed herein. The Company is not obliged to update any such forward-looking statements. Some important factors that could influence the Companys operations comprise economic developments, pricing and demand and supply conditions in global and domestic markets, changes in government regulations, tax laws, litigation and industrial relations.


The Global Economy

The global power sector is witnessing a rapid change with the influx of renewable energy in the power portfolio mix as all nations rise to the challenge of climate change. With energy sources moving to the edge of the grid, the role of players in the sector is also undergoing a change, necessitating a move from conventional methods to service delivery to becoming energy solution providers for the end consumers.

Renewables have become the preferred mode for energy generation and sourcing. The gradual reduction in costs supported by favourable Government policies are bringing about a positive change in the electricity generation mix. As per the International Energy Agency (IEA), the share of renewables is expected to be 44% by 2040, from the current level of 26%.

With an increasing number of nations responding to the challenge of climate change, the energy landscape is undergoing change wherein more than 100 countries have pledged carbon neutrality by 2050 and many more such commitments are on the horizon. Similar announcements on the corporate front have gathered pace worldwide. Be it energy companies or those in the IT/technology space, both utility and non-utility companies are undertaking 100% carbon free initiatives.

Another major global focus has been the adoption of Electric Vehicles (EV). EV deployment targets are witnessing upticks globally, thereby encouraging industry participants to invest in the EV supply chain. EV have been in the spotlight for a while now and are witnessing significant growth owing to growing environmental concerns and the rising demand for sustainable and energy-efficient transportation. Governments across the world have introduced various schemes to incentivize EV purchase over conventional vehicles.

Following a 3.5 percent contraction caused by the COVID-19 pandemic in 2020, global economic activity has gained significant momentum says World Bank in The Global Economic Prospects - June 2021. Moreover, the global economy is set to expand 5.6 percent in 2021 - its strongest post-recession pace in 80 years. This recovery is uneven and largely reflects sharp rebounds in some major economies.

Emerging market and developing economies as a group are forecast to expand 6% this year, supported by higher demand and elevated commodity prices. Growth in South Asia is expected to rebound to 6.8 percent in 2021, 3.6 percentage points higher than previously projected, partly reflecting stronger-than-expected momentum from the end of last year. Out of which India accounts for nine-tenths of the upgrade to growth in 2021, as strong services activity more than offsets the economic effects of the worsening pandemic.


The COVID-19 pandemic has changed the world significantly. The business priorities has changed towards safeguarding and stabilizing operations, liquidity, people, supply chains and markets in this pandemic era. COVID-19 has reminded the world of its vulnerability and heightened the awareness of the public and wider society to global risks.

The challenge from the coronavirus for oil & gas companies has been heightened by the oil price collapse and continuing price uncertainty. All parts of the energy value chain are affected - upstream, midstream, downstream, and service companies. As well as implementing COVID-19 safety measures, companies need to pull all the traditional downturn levers, such as reductions in capital expenditures and cash conservation.

Keeping the power flowing and the lights on during the coronavirus crisis is the number one challenge for power and utility companies. Pandemic protection measures have reduced workforce availability and necessitated strict hygiene and separation protocols to maintain operations.

Business continuity and preparedness plans will need continual review to ensure that operations and infrastructure are properly supported. More than ever, it will be important to work closely with governments and regulators to consider the implications for energy affordability, sustainability and security of supply. Technological transformation will also have been given a boost by the experience of virtualisation and new ways of working by staff during the pandemic lockdown. It is likely to accelerate the move to a more mobile workforce, able to work virtually and at distance. This necessitates to look into the future opportunities towards workforce productivity and flexibility.

The experience of COVID-19 will almost certainly accelerate momentum towards new ways of working, automation and digitalisation. Companies that are further along the curve in digitising their operations have already benefited from greater built-in resiliency during the crisis, reducing dependence on human resources. Greater investments in these areas will equip companies to maintain better business continuity in their supply chains, operations and customer management, reducing the load on their workforces.

Indian Economy - Opportunities and Threats

Indias power sector witnessed many successes in the recent years, including energy access being extended to millions of households, the adoption of energy-efficient LED lighting by most households and expansion of renewable power sources, led by solar. Indias growing urban population, revival in economic activities in the coming quarters after a sizable population gets vaccinated and its quest for affordable, clean and reliable power provide a huge scope for continued growth in power demand.

The Governments focus in the transmission and distribution space has been on private sector participation. This paves way for the increased participation of private players in the Transmission and Distribution (T&D) space, through the Tariff- based Competitive Bidding (TBCB) route in transmission and PPP (Public-Private Partnership) or franchisee models in the distribution segment in a bid to improve performance.

Broadly speaking electricity access is one of the core focus areas of ASEAN countries, and Southeast Asia is making steady progress towards achieving universal electricity access by 2030. The regions electricity demand is growing at a rapid rate of 6% per annum. Given the focus on electricity access to all, microgrids is another area that is garnering attention. The demand for microgrids too is gaining momentum with the backing of the need for resiliency, energy security and electrification of rural and under-penetrated areas in a cost-effective manner without the requirement to extend the conventional grids.

Off all the factors determining the outlook of the energy industry, coupled with the need for affordable, sustainable and modern energy systems, is shaping the power sector and opening business service opportunities for power utilities. This wave of change is not just limited to the power companies but is also opening-up business opportunities for other industry groups like automobile and oil majors, which have been actively participating in this transition through business diversification, acquisition and collaboration with power utilities.


The Power Industry is the backbone of the industrial world, supplying essential energy to industrial, manufacturing, commercial and residential customers around the globe. In developed economies with mature power markets, investment is driven by transition of fuel and energy sources, increased environmental legislation and an ever-aging generation fleet and transmission/distribution infrastructure.

India already has a seat at the top table of international energy affairs, and its role is set to increase in importance in the years ahead. India is the fourth-largest global energy consumer today, after China, the United States and the European Union, and in the path of overtaking the European Union by 2030 to move up to third position.

Energy efficiency and clean energy remained key focus areas for the government throughout 2020. There was a major push for electric vehicles and railway electrification and a parallel drive for renewable energy (RE) integration through various policies.

Indias continued industrialization becomes a major driving force for the global energy economy. The Government of India has also set a revised target of 220 gigawatt (GW) for Renewable Energy integration by 2022, up from 175 GW earlier, 30 percent electric vehicle (EV) penetration by 2030 and 100 percent railway electrification in the next 3.5 years.

However, two parallel stories emerged: one where the falling cost of renewables presented an opportunity for the country to deliver cheaper electricity, the other where Distribution Companies (DICOMS) and Generation Companies (GENCOs) struggled with coal-related debts, unable to free up capital for investments in solar, wind, and storage.

In the Union Budget 2021-22, INR 3,05,984 crores (US$ 42 billion) has been allocated for a revamped, reforms-based and results-linked new proper distribution sector scheme over the next five years. Policy level support for 100% FDI has been allowed in the power sector to boost the FDI.

A robust and efficient power T&D infrastructure is imperative for effective transfer of power from generation source to the consumption points / demand centres. Thus, expanding the T&D infrastructure to transmit the power generated to consumer points across the length and breadth of the country becomes imperative.



India is the third largest producer and second largest consumer of electricity in the world and had an installed power capacity of 379.13 GW as of February 2021. Electricity production reached 1,252.61 billion units (BU) in FY20. The Government is preparing a rent a roof policy for supporting its target of generating 40 GW of power through solar rooftop projects by 2022.

Under the Union Budget 2021-22, the government has allocated Rs. 15,322 crore (US$ 2.11 billion) for the Ministry of Power and Rs. 5,753 crore (US$ 794.53 million) for the Ministry of New and Renewable Energy. Under the Union Budget 2021-22, the government has allocated Rs. 300 crore (US$ 41.42 million) to increase capacity of the Green Energy Corridor Project, along with Rs. 1,100 crore (US$ 151.90 million) for wind and Rs. 2,369.13 crore (US$ 327.15 million) for solar power projects.

In the current decade (2020-2029), the Indian electricity sector is likely to witness a major transformation with respect to demand growth, energy mix and market operations. The Cabinet Committee on Economic Affairs (CCEA) has approved commercial coal mining for private sector and the methodology of allocating coal mines via auction and allotment, thereby prioritising transparency, ease of doing business and ensuring the use of natural resources for national development. India aims to reduce emissions intensity of its gross domestic product (GDP) by 33% to 35% by 2030 from 2005 levels and increase the share of non-fossil fuels to 40% of the total electricity generation capacity.

Based on the forecasts, Indias energy demand could double by 2040, with electricity demand potentially tripling as a result of increased appliance ownership and cooling needs. By raising the level of its energy efficiency ambition, India could save some $190 billion per year in energy imports by 2040 and avoid electricity generation of 875 terawatt-hours per year - almost half of Indias current annual power generation.

In addition to this, your companys entry into Metro Rail projects and mobility segment paves way for favorable business opportunities.

Renewable energy and other Environment conservation oriented actions to create demand:

India has set ambitious targets to increase the share of renewable energy (RE) in its energy mix. The Government of India (GoI) plans to install 175 GW of renewable energy projects by 2022 and 450 GW by 2030.

In the Solar and Wind park, transformers are required as part of the power evacuation system. Step-up generation transformers (33KV) would be needed at each power injection point in the solar park from where power would be transmitted to the nearest substation, which will have a step-up transformer (33KV/220KV), which will raise voltage to higher levels for feeding into the power grid. The company hopes that renewable energy parks can create enough demand. The Government of India is planning to invite bids for the largest solar tender in the world for installing 20 GW of solar power capacity to give a boost to manufacturing of solar power equipment in India.

As Government is pushing Electric vehicle mobility technology very actively, we see there will be demand of Electric vehicle charging stations. These stations will need high power of electricity which is provided at high voltage and thus need Transformers to reduce it low voltage level.

Concerns and Risks:

The major risk factors affecting the Company are over capacity in industry, non-lifting of ready materials due to constraints at customers end thereby building inventory and creating liquidity issues. Increase in receivable positions due to delay in payment by certain customers and uncertainty in execution of low fixed price orders. Other notable concerns include:

1. Raw material price volatility:

Copper and CRGO laminated Silicon Steel are the major raw material which contributes more than 60% cost of total raw material. The supply of CRGO is one of the major challenges in the industry as it needs to be imported and there is less supply. CRGO which is one of the major raw materials for transformers is not being manufactured in India thereby causing more FOREX outflow, further the importers levy high service charge thus escalating the price. Adverse price movement of both commodities can impact the margins of the Company. The Copper price is determined by the London Metal Exchange (LME). Reverse migration of labour due to COVID-19 lock down has impacted capacity of steel fabrication industry which has taken its toll on Fabricated steel items which is 3rd highest cost component in Transformers Raw Material cost structure. The wide fluctuation of rupee against US Dollars also affects margin since the key raw materials, viz. copper, transformer oil, special steels for lamination, etc., are of import origin.

2. Unorganized players:

I ndias transformer market is predominantly unorganised with many small participants catering to the smaller distribution transformer markets. In addition to severe competition with MNC players, domestic manufacturers, Chinese and Korean manufacturers presence makes the market very competitive. Your company has to compete with unorganized players for orders from SEBs, utilities and industrial clients, which makes the market more price sensitive.

3. Overcapacity in industry

Due to the entry of large number of players during favorable time, overcapacity continues to be a major negative factor in the industry as a result aggressive pricing is undertaken by some of the Transformers manufacturers, which could impact margins. However, in the recent times the exit of few market players and closure of plants open up the opportunity for the company to capitalize this vacumn and position itself better.

4. Slowdown in the manufacturing segment

The demand from the manufacturing segment is still a major concern for the industry, the manufacturing sector is yet to see an investment uptick due to low capacity utilisation and this has led to slowdown in new as well as expansion projects. The slowdown in the manufacturing segment has a Domino effect on the overall transformer industry - low power demand from the manufacturing segment is one of the major reasons for reducing peak power deficit in the country, excess power from the manufacturing sector is diverted to residential and agricultural sectors shortening power outages in these sectors. Unless power demand from manufacturing segment increases the utilities will be not be very enthusiastic to spend on improving poweravailability or expanding the network. Hence, demand expansion in the core manufacturing sectors is very critical for the transformer industry.

5. Financial Health of State Discoms

Years of populist tariff schemes, mounting Aggregate Technical & Commercial losses and operational inefficiencies have adversely affected the financial health of State Discoms which are currently plagued with humongous out-standing debts.

6. Delay in payment to IPPs by EBs

There is considerable delay in payment to Independent Power Producers (IPPs) by Electricity Boards (EBs). This delay affects financial health of IPPs and in turn affects cash cycle of Original Equipment Manufacturers. OEMs have to be choosy in accepting orders from such IPPs and this affects year to year growth.

7. Renegotiation of wind and solar power purchase contracts by state utilities

Industry witnessing a trend of State utilities reviewing and renegotiating the signed power purchase agreements (PPAs) with wind and solar power developers. This impairs the cash flows of projects and may impact investor sentiments in the sector. PPA renegotiation or cancellation to be an event risk and a deviation from normal business proceedings, as these are not embedded in the contracts

8. Utility Orders

The transformer industry largely depends on the spending from transmission and distribution utilities and recent tenders/ordering activity by utilities clearly demonstrate the downward trend. Lack of funds is one of the key reason behind it. All Contracts awarding by the utilities are based on low price (L1) bidder which resulting in price war with unorganized players without compromise on the quality is the challenge for the organized quality driven Companies. The payment terms of utilities are generally high credit period compared to private parties which impact the Companys cash flow.


With emphasis of central Government on renewable energy generation addition, country is moving towards decentralized electricity generation. Earlier, bulk electricity was generated near coal mines in central and east part of India and then transmitted through EHV lines of 400 KV & 765 KV to Western and Southern part of India. As majority of renewable parks are located in Western and Southern India, growth of 400KV or 765 KV Transmission lines will be limited. This mean 220 KV class Transmission equipment will be in demand where your company is appropriately positioned. In addition to the domestic market, your Company has taken steps to foray into the global market improve its performance and reach.

Due to excess installed capacity of Indian transformer industry and heavy competition, last few years were challenging. In these years some established transformers manufacturing plants have been closed down whereas your company sailed through these difficult times. Your company sees this as opportunity to fill vacated space and increasing market share in 220 KV product segment.

By leveraging capabilities in quality products, combined with your Companys energy platform well positioned in the market and with a focus on intelligent grids, you company is moving forward to enable customers to increase resilience and efficiency, and unlock new business models. Your Company leapt forward, driven to power good for a sustainable energy future with its strong customer market and quality transformers.

Your Company will be solidifying its presence in the power sector and expanding its footprint and product portfolio to support Indias talent and manufacturing capabilities.


The Audit Committee and the Board of Directors reviewed internal controls and the progress of implementation of the recommendations of internal audits. The Whole-Time Director/ CFO certification provided in the report discusses the adequacy of our internal control systems and procedures.

Your Companys existing framework provides for risk reviews at various levels based on the organizational structure matrix. Periodic assessment of risks, potential impact relating to business growth, profitability, talent engagement, and market position are conducted. Response to key operational risks, based on inputs received from the internal and external assessment, internal and performance review among others are done on a regular basis.

The aim is to minimize adverse impacts, leverage market opportunities efficiently, and enhance your business competitiveness. The Company has an Internal Financial Control (IFC) process which aims at providing reasonable assurance on - reliability of financial information, compliances with laws and regulations in force and realization and optimization of operations. It ensures documentation and evaluation of unit and entity level controls through existing policies and procedures, primarily to identify any significant gaps and define key actions for improvement. Management conducted an assessment of the effectiveness of internal financial controls and based on this assessment, management has determined that the Companys internal financial controls as of March 31, 2021 were effective.

Your Companys internal control environment is in place to take care of, inter alia, financial and operational risks. The Company has an independent Internal Auditor for periodically carrying out audit of the transactions of the Company in order to ensure that recording and reporting are adequate and proper. The Internal Auditors independently evaluate the adequacy of internal controls to ensure that internal controls, checks and balances in the system are adequate, proper and up-to-date.


Your Company strongly believes that its employees are the key pillar of your Companys success in the market. Your Company continues to attract the best of talent, thanks to its diverse yet inclusive culture and ability to opportunities for their career growth. Your Companys people strategy is aligned with its overall vision to be the pioneer in shaping the future of sustainable energy and your Company is committed to nurturing a cordial and diversified work environment in a growing market and in maximizing the potential of its workforce.

Your company recognizes employees are the foundation of corporate success. We consider them our most valuable assets, and have been working towards keeping them engaged and Inspired. In continuation of it, this year we have established a process to identify and recognize performing employees through "Employee of the Month" scheme. We believe this will engage and inspire employees to stay longer. We have employees who have been with us for more than 25 years. Our periodical trainings have enhanced productivity and product performance on quality front.

Our work place culture not only attracts and retains the best employees but also attracts employees who have left us for better prospects to re-join us. The Human resource department builds friendly relationship with each employee and helps them resolve grievances at short notice thereby inculcating an employee friendly environment which is highly rewarding.

Amid the impact of COVID-19 and the challenges it presents on a personal and business level, health and safety of the employees and their families are the priority of the company. The company has undertaken all safety measures across the plant and are following increased protocols to ensure our people are safe and secure.

The Confederation of Indian Industry (CII) has recognized your company with Environmental Health and Safety (EHS) Excellence Award - 3 Star Rating. This is result of the companys consistent work to improve health and safety condition at our workplace.


The financial statements complied with the requirements of the Companies Act, 2013, and the Generally Accepted Accounting Principles (GAAP) in India. The financial performance of your Company was affected by the combined impact of pricing pressures in the marketplace, increases in input costs, delays in projects as well as complying with stringent design specifications of the customers.

The Covid -19 health crisis have led to an unpredictable business climate in terms of demand and future outlook. Post Covid-19 the outlook is highly uncertain, the Company expects current year to be more tough and challenging compared to past. The economic environment in which Company is operating has created uncertainty for short term. The path back to normality after the health crisis subsidies, is likely to be slow.

The Company is adopting cautious approach in its Current year Business Plan. Amid uncertainties due to Covid, the Company is taking a balanced view on scaling up manufacturing operations and timely delivery to enable the adequate cash flow for the operations. The management expects and believe that delay in receivables and delay in dispatch of products resulting in finished goods inventory buildup are short term challenges and that Indias economic growth has the potential to bounce back once the Covid-19 pandemic settle.

Despite all challenges, the Company is fully focused on attaining sustainable growth with the best practices at operations along with the expertise of its parent company.


Particulars 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12
Gross Sales & Other Income 20,892 21,075 21,463 23,016 16,591 22,318 18,671 11,455 12,495 12,596
Net Sales & Other Income 20,892 21,075 21,463 22,472 15,059 20,263 17,363 10,485 11,554 11,572
Earnings before Depreciation, Interest and Tax (EBDIT) 1,133 507 -268 151 -308 937 632 -529 -3,857 -3,218
Depreciation 482 479 519 474 482 535 518 299 504 412
Profit After Tax 629 192 -839 -369 -1,127 402 -374 -1,880 -5,018 -3,998
Equity Dividend % - - - - - - - - - -
Dividend Payout - - - - - - - - - -
Equity Share Capital 1,062 1,062 1,062 1,062 1,062 1,062 1,062 1,062 1,062 1,062
Reserves and Surplus 12,261 11,591 11,455 12,348 12,757 14,425 14,023 -450 1,430 6,447
Net Worth 13,323 12,653 12,517 13,410 13,819 15,487 15,085 612 2,492 7,509
Gross Fixed Assets 6,731 6,671 6,563 5,987 5,909 10,106 10,003 9,888 9,902 9,822
Net Fixed Assets 4,374 4,797 5,159 5,034 5,429 6,215 6,635 7,047 7,309 7,667
Total Assets 18,660 20,193 19,346 20,868 20,868 21,269 20,659 18,270 17,684 17,599
Key Indicators 2020-21 2019-20 2018-19 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 2011-12
Earnings per Share - Rs. 5.92 1.81 -7.90 -3.48 -10.62 3.79 -3.52 -17.7 -47.25 -37.65
Turnover per share - Rs. 196.72 198.45 202.10 216.72 156.22 210.16 175.82 107.35 117.65 118.71
Book value per share - Rs. 125.45 119.14 117.86 126.27 130.12 145.83 142.04 5.76 23.46 70.72
Debt : Equity Ratio - - - - - - - 20.62:1 3.27:1 0.71:1
EBDIT / Gross Turnover % 5% 2% -1% 1% -2% 4% 3% -5% -32% -26%
Net Profit Margin % 3% 1% -4% -2% -7% 2% -2% -19% -42% -32%
RONW % 5% 2% -7% -3% -8% 3% -2% -307% -201% -53%
ROCE % 8% 4% -2% 1% -2% 6% 4% -77% -150% -42%