klg systel ltd share price Management discussions

KLG SYSTEL LIMITED ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS Annexure-II A) Business Overview and Outlook: The company used Financial Year 2010-11 to consolidate the business of both its Power and Life Cycle business. The company remained focus on its own Connectgaia-Intelligent Electricity and Water management solution and extended portfolio in the Life Cycle business where it successfully formed new relationships to respond to the changing needs of the Indian market. The Connectgaia technology is now gaining lot of traction in the market and the company has been able to secure number of orders in Transportation, Municipal, Public Works, Manufacturing and Water & Waste Water sectors. The technology is helping our customers in these segments by way of saving energy, automation of working of key assets of the company and eventually reduces the carbon footprint. KLG offers knowledge solutions to oil & gas, process, power, water, ferrous and non-ferrous metals, manufacturing and infrastructure sectors in India by providing a unique mix of industry domain expertise, software solutions, consultancy and training. With a strong knowledge base and domain expertise in specific verticals, KLG continues to leverage its existing resources and relationships. The company is expanding its portfolio of offerings in specific verticals continuously with a view to enabling its SBUs in addressing a wider spectrum of market opportunities. B) Segment-wise Performance: A review of the performance of the various Strategic Business Units is given below: (i) POWER SYSTEM SOLUTIONS: The Power System Solutions SBU provides end-to-end integrated solutions for the complete Business Process Automation of Power Distribution Utilities as well as solutions for end consumers of power. These solutions cover hardware, software and communication technologies. Your Company has been developing the products for Power Sector and has assimilated a lot of experience in the Indian Power Sector. * Your Company has been able to maintain the competitive edge in the market and is implementing the following prestigious orders: * To act as an IT Implementing Agency in CSPDCL under part A of R-APDRP from Chattisgarh State Power Distribution Company Limited (Rs. 89 Crores). * Spot Billing for 0.5 million consumers for Punjab State Electricity Board * Operation and Maintenance of IT Infrastructure for 1.0 million consumers for BEST, Mumbai. * Supply and Erection for Rural Electrification of 11,806 villages of Punjab under Rajeev Gandhi Grameen Vidyutikaran Yojna. * Supply and Erection of 13 no 33-kV Substations in Panchkula, UHBVN (Rs. 30 crore) Major Opportunities in the current year: Connectgaia.com-Intelligent Energy Management & Demand Response Solution: Connectgaia is a convergence of the internet and power highways empowering electricity and water consumers to intelligently manage their electricity and water consumption through web. It is an end-to-end solution for empowering electricity and water consumers to Measure, Visualize, Analyze and Control their usage in real-time and without any geographical boundaries. It enables energy and business managers, executive staff, and Operations & Maintenance personnel to view electricity consumption and relevant cost data through highly dynamic customizable reports, charts, and graphs. Connectgaia solution is a combination of field devices and enterprise portal that seamlessly integrates energy demand points with meters, sensors, controllers and enterprise web portal. Connectgaia has received industry recognition in India and abroad and there are a number of installations of Connectgaia in various industry segments. Connect Gaia is an enabler for Smart Grid framework where the objective is to make the grid more responsive to the ever-fluctuating electricity demand. Each industry segment has a different requirement to monitor and control their utility consumption and hence Connect Gaia provides a highly customizable dashboard so that users can customize them based on their specific functional needs. Since Connect Gaia is web based, it has wide applications for companies who have a geographically spread infrastructure such as water networks, transportation networks and cluster of building and townships which need to be monitored and controlled at a specific location level as well as enterprise level. In absence of Connect Gaia, companies generally have a very cumulative view of their electricity consumption and assets and hence often fall short of taking a strategic decision to reduce their cost of utility. In light of the above, Connectgaia has already got enormous response in the following markets. a. Water and Waste Water b. Railways c. Municipal Corporations d. Public Works Department e. Industrial Facilities and f. Green Building Initiatives As on date, Connectgaia is being used in the following applications. a. Water Asset Monitoring on intake and distribution side b. Pump House monitoring and automation c. Sensor based intelligent pump operations for remote applications d. Street Lighting automation e. Sub-station automation f. Building Management g. Automated Metering h. Outdoor Lighting Management 1. Market Coverage: Connect Gaia is presently sold on a hybrid Direct and In-direct model. Connect Gaia account management team currently handles large and strategic opportunities while the channel services already established requirements. This gives us a good market coverage but ensures that we are directly involved in creating new market demand. We are in the process of appointing additional partners to have effective market coverage in India. Water sector and Indian Railways have emerged as good market for Connectgaia. 2. International Marketing: Connectgaia addresses a market segment, which has a global demand. It has been found through research that the issues and challenges in the electricity market are very similar across the globe and companies are fighting a similar battle to save energy and get a deeper view of their energy consumption patterns. Most countries are working on an ambitious Smart Grid initiative where Connectgaia plays a vital role. In Phase-I, we have identified following markets for Connectgaia presence through a combination of direct and indirect channel network. a. South East Asia b. China c. Americas d. Middle east and Africa Connectgaia R & D team has worked with Intel on an Intel 32-bit industry class atom chipset which has provided us an opportunity to launch entirely new set of applications in the energy management and industrial automation areas. Intel has also partnered in KLG. Application/Benefits of Connectgaia.com Online monitoring and measurement of energy usage: Remote switching on and off of equipment, machinery, street lights, water pumps or appliances- instantaneously On Demand/Time based scheduling & Rule based scheduling Energy planning and load forecasting Energy accounting and balancing to check wastages and theft Communicates with temperature, pressure, light, flow, level and all types of sensors Ensures utilities comply with power delivery service levels and utility bill verification Allows users to participate in Demand Response with utilities and power network Allows monitoring of quality parameters in the water and power distribution network Allows for time of day tariff based incentive program Generation of recommendations to improve quality of power Monitor equipment performance or system behavior Detects the need for load shedding. Guide to optimize the need for captive power plant generation Stimulates the economic development of an organization Contributes to saving of energy resources. Appliance Protection features to safe guard the connected load from power line disturbances/abnormalities. Connectgaia.com is technology partner with global leaders such as IBM, Intel, ZigBee Alliance, Landis+Gyr and many more. Connectgaia.com has been awarded and appreciated for its excellence in innovative product category several times by the leading and renowned award committees and organizations. Some of our major accomplishments include: 2010 IBM Beacon Award for Cloud Computing Innovation IBM Solution Architecture for Energy & Utilities Framework validation (This validation makes KLG Systel the only ISV having a SAFE certified AMI solution in the ISA region) 2009 Logica Global Innovation Venture Partner Award 2009 IBM Ready for Energy & Environment Solution Validation 2009 Best Lotus Energy and Environment (Green) Award 2009 IBM Beacon Award finalist in the Outstanding Energy & Environment (Green) Solution * 2008 NASSCOM Innovation Awards (Finalist) * 2008 IBM Best ISV Award Energy & Utilities Industry Solutions 2007 CM National Award for Excellence in Energy Management 2007 Golden Peacock Award in the Innovative Product/Service Category * Among NASSCOMs 100 IT Innovators of 2007 CE Certification Connectgaia - Magic Meter: We believe in constantly upgrading our Connectgaia.com family of products to keep abreast with latest technologies and have recently launched Magic Meter which is an extension of Connectgaia.com. Magic Meter is a device which allows users to monitor electricity consumption of the home and office appliances like air-conditioners, printers, etc which consume less amount of electricity and also control them from anywhere. Key features of Magic Meter include Energy consumption and cost calculation, support to Home Area Network (Zigbee/Wi-Fi), control of appliances from internet or HAN, monitor of power quality, scheduled on/off of appliances, Email alerts and Group Metering. (ii) BUSINESS LIFE CYCLE SOLUTIONS: In Business Life Cycle Solution focus is on enhancing and effectively using the domain knowledge acquired. The future direction of the company is to consolidate its customer base and to customize and verticalise the life cycle solutions to address the evolving needs of Indian Industries. Some of these growing needs are seamless integration of software solutions within the organization to meet the core financial management, human resources, customer relationships and the supply chain, as well as other functional needs of the organization. The company has formed an exclusive relationship with Digsilent GMBH which is based out of Germany. The relationship will help the company in addressing the complete value chain of the power sectors comprising of Generation, Transmission and Distribution. This relationship will also help the company in addressing the emerging renewable energy market that is growing at a significant pace. (a) Enterprise Project Management: Enterprise Project & Management solutions bring together the disciplines of strategic planning & project management. They provide a framework for effectively managing both resources and the tactical plans for Projects. Delivering projects on time & on budget is a minimum requirement to do business for most organizations and in many industries it is critical to long-term success. Companies that adhere to strong project management methods, including detailed evaluation of scope and budget, ongoing risk management and measurement of project results are consistently more successful than those that do not. Following a structured project management method enables companies to predict and mitigate risks, better manage costs and deliver quality results that satisfy clients. In the most mature organizations these goals are linked to the strategic business objectives, giving these organizations a powerful competitive advantage. Your Company trained large number of professionals in Project Management who were from corporate such as L&T, Reliance, ONGC, GAIL, Tata Power, IOCL, SAIL, Railways, Jindal and many more. They were certified as per training program of PMI, USA which it represents in India. (b) Computational Engineering & Sciences (CES): This SBU continues to be a major contributor in the overall business of the company. With Indias GDP on track & major investments happening, the SBU promises to deliver more than expected in coming years. Your company addresses the engineering design and analysis requirements of its clients by partnering with them in implementation of the Plant/ Product life cycle. This is done through your Companys rich industrial and consulting experience, combined with state-of art software and hardware expertise in solid 3D modeling, plant design, piping analysis, FEA/CFD rapid prototyping, etc. A variety of solutions have been integrated to cover the entire lifecycle of manufacturing, process, petrochemical & infrastructure organizations, one of which is the integration of CAD, GIS & GPS solutions for a utility application. The Computational Engineering & Sciences SBU provides design & analysis tools and services in the area of Plant &Product life cycle to various segments including Oil & Gas, Infrastructure, Manufacturing, Metal etc. We are one of the leading end to end solution providers in this segment in India having experience of more than 20 years. The Company provides tools and services in the following are as: 1. Computer Aided Design 2. Computer Aided Engineering, 3. Plant Design & Analysis 4. Computer Aided Manufacturing 5. Civil/Architectural/Structural Design& Engineering. 6. Enterprise GIS Your company with its partnership with Autodesk offers a broad range of solutions in almost all vertical segments like Mechanical, Civil, Architectural, Electrical. From basic engineering drawing to digital prototyping in Mechanical, to advanced structural detailing in civil & structural and to Building Information Modeling in Architectural, your company provides comprehensive tools and services in CAD domain as one of the leading partner of Autodesk in India. Many of our customers have standard tools based on AutoCAD platform, which is an outcome of the efforts put by us for years. Your company is also associated with Autodesk to provide support to their large installation base in India including companies like BHEL, L & T, Alstom, EIL, Dasturco. With the strategic relationship with Intergraph, your company provides complete end to end solution in the field of plant design. From P & ID to digital plant models, your company provides tools and services for comprehensive design, analysis and modeling in the field of piping, structures, vessels. The company provides solutions where customers can have designers and engineers anywhere in the world working simultaneously, sharing information on projects, all with complete accuracy and synchronization of effort. This eliminates redundancies and reduces errors and delays, saving time and costs throughout the process. Customers: Your Company has a large customer base across all segments in the industry. The enterprise accounts include Larsen & Toubro, Engineers India Limited, Samsung, Indian Oil, Tata Steel, Mecon, BHEL, SAIL, Reliance (ADAG), Essar, Siemens, Alstom, Areva, SMS Demag, Humbolt, Technimont ICB, HCC, IOTL, Godrej, POSCO, Ordinance Factory, VECC-Dept of Atomic Energy, BARC, Geological Survey of India, JUSCO, Jindal, Vedanta, Hero Honda. (c) Industrial and Infrastructure Automation: Your company has enhanced the portfolio of services in this segment by way of partnering with hardware OEMs such as Mitsubishi Electric and IBM. Automation is a rapidly growing market in India. As new infrastructure is being created both in manufacturing as well as in public services, there is a growing need to automate the facilities as well as manufacturing processes. This business unit continues to sustain the growth momentum shown over the years. We have been able to create generic plant automation solutions for the metal industry including steel and aluminum. Our solutions have enabled manufacturing agility, design agility, supply chain agility for the players in these sectors. Your Company offers integrated solution for Industrial Automation and Supply Chain Planning and Optimization. Your Companys Manufacturing Execution System provides complete solutions to analyze the data captured from a wide variety of data sources over multiple sensors, plant organization to improve uniformity, increase yields, maximize productivity and decrease maintenance costs. Your Company assists the customers to achieve these goals by delivering information and analysis tools that organize and deliver plant intelligence, which is accessible throughout the organization from the Sensorto-Boardroom. As a result, the organizations are able to make better-informed decisions about their business. Your Company, for the last 12 years, has been offering IT enabled business optimization solutions in the manufacturing space. These solutions have evolved from a Human Machine Interface and Shop Floor Scheduling solution to a complete Plant Intelligence and Supply Chain Optimization application framework. The agility to accurately promise and quickly deliver increasingly customized products or new products requires synchronization across a broad scope of manufacturing activities performed by multiple organizations. (C) Adequacy of Internal Control: Your Company has an appropriate internal control system for business processes with regard to efficiencies of operations, financial reporting and compliance with applicable laws and regulations etc. The operating processes encompassing the entire gamut of operations are well-established and documented. Adequate internal control procedures and measures are present for cost control, purchase of materials, plant and machinery equipment and other items and maintenance and their sale and disposal. (D) Human Resources: Human Capital is a crucial asset for an IT and ITES Industry and an important business driver. Your Company considers its human resources as its most important asset. Your Company employs a number of well-qualified and skilled employees. Attracting, retaining and motivating employees and creating an environment that nurtures them to deliver their best has been a constant challenge for your Company. Your Company continues to invest in training and development programs for its employees in India as well as abroad. The Company has instituted number of Employee Stock Option Schemes from time to time for rewarding the well performing employees who are contributing to the growth of the company. At the end of the year under review, the total strength of the employees is 311.