General Economy
Post devastation of economy of various countries high inflation in developed countries
like UK coupled with recession looming largest in most of the developed nations including
USA leading to many a corporate giant especially in IT sector has laid off thousands of
their employees. Further the continuing war/ hostilities amongst the nations and turmoil
being seen in Banking Sector at the global level does not augur well for the world economy
in 2024 and for some years beyond. In this gloomy scenario Indian economy has shown
resilience so far and the GDP expected at 7% in FY 2022-23 when all figs get assimilated
and RBI projection for FY 2023-24 is 6.5% considering many an adverse factors prevailing
globally and Indian economy for past couple of decades is closely knitted with global
economy.
As far as India is concerned, the Central Government and RBI took a number of remedial
steps restricting the adverse global impact have controlled inflation and economic
downturn. Under Central Governments positive policies under "Make in India"
pursuit has resulted in many a global manufacturing and distribution outlets setting shop
in India. The Central Governments tactical move to buy cheaper Russian crude has helped
Indian economy from global Crude Shock resulting from prolonged wars between nations.
Planned boost for basic infrastructure in Road and Transport sector have lot of long
term benefits for the generations to follow.
Both Direct tax and Indirect tax mainly GST collections clocking one lakh crore plus
consistently are reflecting the Indian Growth story.
Company Business
The renewable power generation, which is the business of the Company, though has
received all encouragement from both central and state governments have not grown to the
extent expected due to pessimistic approach of many regulatory commissions and most of the
State utilities, the latter themselves being in doldrums. In many states tariffs have not
being encouraging and sale to third parties are being throttled by imposing high open
access charges under one pretext or other. In fact as was mentioned last year the Company
has shifted from Sale to third party to Sale to Board for its main wind farm in
Maharashtra from January 2020. However Certain Developers and Wind Power Associations have
filed petitions in Bombay High Court as well as in APTEL and based on favourable outcome
Company may shift back to third party sale of power.
The performance of the Company is directly linked to the Renewable Energy Policies of
both Centre and State Governments, effectiveness of Nodal Agencies and formulation of
encouraging policies and implementation thereof by State Electricity Regulatory
Commissions.
The silver lining during the year have been the favourable order from CERC resulting in
both Telangana and AP utilities clearing old dues from January 2011 to May 2014 along with
interest at 14% and the Company realizing an aggregate amount of Rs. 8.33 Cr.
Further the Ministry of Power has paved the way for realizing regular dues in
Installments along with interest for delays. AP has chosen to pay in 12 installments of
the dues as of May 2022 and TN in 48 installments of the Dues as at end June 2020. This
has facilitated regular cash flow leading the Company pre-paying the term loans availed
from Bank and become DEBT FREE.
OUTLOOK, OPPORTUNITIES AND THREATS
The Pandemic Covid-19 continues to raise its head time and again after gap of every few
months causing anxiety.
As far as Companys operations are concerned like any other renewable energy entity
many adverse regulatory changes have been worse than the pandemic. Some sites are
recording negative earnings. The Company has taken lot of steps for cost reduction, tight
cash flow management, policy changes to mitigate the downturn. In fact during the
financial year it sold its lone wind mill along with the land at Poolvadi in Tiruppur
District, in Tamil Nadu. The Company may also sell some more wind mills which due to
passage of time has outlived its technical life and continuing its operation even with
good operation and maintenance may prove uneconomical as tariff remains fixed for many
years with no adjustment to inflation or factual cost of repairs and establishment costs.
As it stands today, it seems the Central Governments ambitious quantum leap in RE
Power is encouraging only big business houses who are jumping into the Green Power
bandwagon as their pockets are deep and may be able to absorb the running losses in the RE
Business which they may leverage for growth in their other core businesses.
RISKS AND CONCERNS
On the Renewable Energy Sector, the considerable delay in processing or decision making
by state utilities and State Electricity Regulatory Commission and also the higher
judicial authorities have been resulting in considerable strain on the sustainability of
small wind farms and also impeding the future projects.
The experience of the Company has been that inordinate delays in adjudication of the
matters by Electricity Regulatory Commission, Appellate Tribunal for Electricity and
higher courts result in acute pressure on the Company due to huge mismatch in inflow and
outflow of funds barring the financial year FY 2022-23 as it received the favourable CERC
Order directing payment of long pending dues of Jan 2011 to May 2014. In the wind power
business the expenses are more or less fixed and also the loan repayment and interest to
lenders like banks, however, the delayed receipt of generation proceeds necessitate that
company has to resort to temporary borrowings to tide over the mismatch. This is also a
concern as it has to bear the brunt of finance cost. However the good turn of events in FY
2022-23 helped the Company to tackle the liquidity issues and based on past experience,
this could an exception and same old problems would surface in future.
The Management Discussions and Analysis explaining the objectives of the company, the
opportunities and threats, the outlook for the future, the risks and concerns have to be
read with the meaning of relevant applicable laws and regulations. The actual physical
performance may differ materially from those explained hereinabove.
INTERNAL CONTROL SYSTEM
The company has a system of internal controls to ensure that all its assets are
properly safeguarded and protected against loss from unauthorized use or disposal. Further
all the internal control system is practiced by the company to ensure that all
transactions are authorized, recorded and reported correctly.
The Company has an Audit Committee of Directors which reviews the adequacy of internal
controls.
MATERIAL DEVELOPMENT IN HUMAN RESOURCES
The business in which the company is engaged does not call for large manpower
resources.
The company has a team of able and experienced professionals. The work culture and
value system in the company is designed to provide each employee the adequate space,
freedom and guidance to bring out their full potential and provide personal growth
opportunities within the organization. The human resource assets have been ably supporting
the company despite the issues which the company is facing in its chosen field.
SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS – To fill in
| Sr. No. Parameters |
F.Y. 2022-23 |
F.Y. 2021-22 |
| 1 Debtors Turnover |
79.94% |
30.34% |
| 2 Inventory Turnover |
17.27% |
8.93% |
| 3 Interest Coverage |
7.29% |
0.34 |
| Ratio |
|
|
| 4 Current Ratio |
1.31 |
0.57 |
| 5 Debt Equity Ratio |
0.31 |
0.87 |
| 6 Operating Profit |
104.85% |
102.68% |
| Margin (%) |
|
|
| 7 Net Profit Margin (%) |
56.19% |
(8.21%) |
| 8 Return on Net Worth |
15.95% |
(7.74%) |
Notes :
The ratios are in respect of ordinary activities and hence exclude impact of other
comprehensive income.
a) The variation in Debtors Turnover percentage is due to inordinate delays in
releasing the generation proceeds by State Utilities coupled with reduction turnover as
from 01.01.2022, the company switched to sale to utility from sale to third party as
latter involved very high open access charges payable to utility and other agencies such
that though gross unit realisation was good in sale to third party, net unit realisation
after deducting pen access charges worked out even less that unit rate for sale to utility
drastically affecting the net profit.
b) The variation in Inventory Turnover Ratio is again due to reduction in turnover
being less as detailed under "a" above.
c) The variation in Interest Coverage Ratio is due to marked improvement in Profit
before tax as Company switched to Sale to utility from 01.01.2022 from Sale to third party
as detailed in "a" above and further realised old dues along with interest from
AP utilities pursuant to favourable CERC order .
d) The variation in Current Ratio is primarily due to Company closing the deposits with
banks to prepay bank term loans.
e) The variation in Debt Equity Ratio is due to the Company prepaying bank term loans.
f) The variation in Net Profit Margin and Return on Net Worth are attributable to
operating profits in FY 2022-23 being good due to reduction in Finance Costs due to
clearing of bank term loans , reduction in Open Access Costs since Company shifted from
sale of Power to third party through open access to sale to utility from its 18MW wind
farm in Satara District , Maharashtra and further realised old dues along with interest
from AP utilities pursuant to favourable CERC order.
| Sd/- |
sd/- |
| Chetan D. Mehra |
T V Subramanian |
| CEO & Managing Directors |
CFO & Company Secretary |
| (DIN : 00022021) |
|
| Date : 25th May, 2023 |
|
+91-9892691696
