Pitti Engineering Ltd Management Discussions.


According to World Economic Outlook, April 2019, the global economic growth is expected to pick up in the second half of 2019, led by significant policy accommodations by major economies. This trend is expected to continue in 2020, which will grow by 3.6%. Beyond 2020, the global economic growth is expected to stabilise at around 3.6% for the mid-term led mainly by robust growth in India and China, and their increasing share in the world income. Meanwhile, India is expected to continue its lead as the worlds fastest growing major economy and an attractive investment destination. The economic growth in the country is projected to pick up to 7.3% in 2019 and 7.5% in 2020, supported by recovery in investments and robust consumption demand amidst the softening stance of monetary policy and expected impetus from the fiscal policy. This scenario is expected to open up great opportunities for Pitti Engineering Limited (PEL) across major industries such as capital goods, transportation and power. In 2018, the Indian economy grew at 7.1% backed by investments and reforms by the Government such as the implementation of Goods and Services Tax (GST), new Insolvency and Bankruptcy Code (IBC) and opening up of sectors for Foreign Direct Investments (FDIs).

On the other hand, the growth rates for many economies such as US, UK and Germany have been revised downwards. Led by a slew of factors including the ongoing trade tensions, tighter financial conditions across economies, uncertainty over fiscal policy and introduction of new emission norms. The ongoing trade tensions between US and China are expected to provide tactical opportunities to PEL, especially in the areas of windmill parts wherein China holds 90-95% of the world supply.

Overview of the World Economic Outlook Projections

(Percent change, unless noted otherwise)

2018 2019 (P) 2020 (P)
World Output 3.6 3.3 3.6
US 2.9 2.3 1.9
Euro area 1.8 1.3 1.5
India 7.1 7.3 7.5
China 6.6 6.3 6.1
Mexico 2.0 1.6 1.9
Brazil 1.1 2.1 2.5
Germany 1.5 0.8 1.4
Canada 1.8 1.5 1.9
UK 1.4 1.2 1.4
Source: WEO, April 2019


Capital Goods/Engineering

Over the last few years, the Indian engineering sector has witnessed remarkable growth led by enhanced investments in infrastructure and industrial production. The initiatives like ‘Make in India and 100% Foreign Direct Investment (FDI) have led to major investments with international players foraying into the Indian engineering sector. As per the data released by Department for Promotion of Industry and Internal Trade (DPIIT), the FDI inflows into Indias miscellaneous mechanical and engineering industries during April 2000 to December 2018 stood at around US $ 3.56 billion. Indias engineering exports increased by 16.8% year-on-year to US $ 76.2 billion during 2017-18 as against US $ 65.24 billion in the previous fiscal, according to Engineering Export Promotion Council (EEPC). In FY2016-17, the turnover of capital goods and engineering industry stood at US $ 125.4 billion. The market size of construction equipment industry is expected to grow to US $ 5 billion by FY2019-20 from US $ 4.3 billion in FY2017-18. By FY2021-22, the electrical equipment market size is forecast to reach US $ 100 billion. Heightened construction activity in the country and Governments push towards ‘Ease of Doing Business and ‘Make in India provides an apt environment for PEL to tap opportunities in the sector and expand into newer avenues of the engineering sector.


Rail-based transportation is expected to play a key role in the economic development and growth of the country as Government focuses on investments in rail infrastructure through its investor-friendly policies. It has moved quickly to enable Foreign Direct Investment (FDI) in railways to improve infrastructure for freight and high-speed trains. The share of rail-based transportation in the overall land-based freight transport is targeted to increase from 36% to 45% by 2030.

At present, several domestic and foreign companies are looking at investing in Indian rail projects. According to the data released by the Department for Promotion of Industry and Internal Trade (DPIIT), FDI inflows into Railways Related Components stood at US $ 940.92 million during April 2000 to December 2018. In 2018, the Indian Railways achieved all-round progress with firm focus on safety and passenger services by leveraging latest technology and the ‘Make in India initiative. The Government of India has undertaken serious efforts towards expansion, technology upgradation and modernisation of the entire rail-based transportation, including Metro Train network and the Dedicated Rail Freight Corridor. Under the ‘Make in India Policy, Indian Railways has achieved 100% indigenisation in the manufacturing of around 20-25% of total fleet of the track machines, such as Utility Vehicles (UTVs), Rail Bound Maintenance Vehicles (RBMVs), Track Laying Equipment (TLE), Rail Threader & Rail-cum-Road Vehicles (RCRVs).The railways is also looking at further increasing the local content in the fleet machines to 51% to 80% from 20% to 50% at present. Indian Railways capital expenditure stood at Rs. 1,33,396 crore for FY2018-19, an all-time high and was up Rs. 30,000 crore from the capex achieved a year ago.

This provides PEL a larger canvas to play in the railways modernisation and expansion drive of the Government. The Indian Railways entered into Rs. 40,000 crore agreements with US-based GE and France-based Alstom to setup locomotive factories in Marhowra and Madhepura districts of Bihar. Spread over 10 years, the agreements cover 1,000 diesel locomotives to be manufactured by GE and 800 electric locomotives by Alstom. These projects would result into around Rs. 1,000 crore of business for PEL during the tenure of the agreement.

Union Budget 2018-19 Interim Budget 2019-20
The Government announced addition of 12,000 wagons and 5,000 coaches during 2018-19 Modernisation of 600 railway stations with footfall of over 25,000 Overall, the capital expenditure programme to be of Rs. 1,58,658 crore Semi high-speed "Vande Bharat Express" introduced - first indigenously developed and manufactured All Unmanned Level Crossings on broad gauge network eliminated ‘Safest year for railways in its history

Source: PIB


The Government of India has floated a slew of policies to support the infrastructure sector. Some of these include Smart Cities Mission, Swachh Bharat Mission, Atal Mission for Rejuvenation and Urban Transformation (AMRUT), Bharatmala Pariyojana and Pradhan Mantri Awas Yojna. Bharatmala Pariyojana aims at optimising efficiency of freight and passenger movement across the country by bridging critical infrastructure gaps through effective development of Economic Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement, Border and International connectivity roads, Coastal and Port connectivity roads and Greenfield expressways. In the Phase I, a total of around 24,800 kms is being considered, in addition to 10,000 kms of balance road works under NHDP (National Highway Development Programme). This takes the total road construction to 34,800 kms at an estimated cost of Rs. 5,35,000 crore. The Phase I is planned over a five years period of i.e. 2017-18 to 2021-22.

Moreover, the Governments ‘Housing for All scheme and policy reforms such as Regulation and Development Act (RERA), REITs (Real Estate Investment Trust), Insolvency and Bankruptcy Code (IBC) have fast tracked development on strong growth trajectory led by investments, transparency and accountability. These revolutionary reforms are expected to revive the infrastructure sector and attract more investment opportunities. The increased spend on irrigation projects and smart cities model by the Government will result in enhanced business opportunities for PEL. PEL has supplied Stator and Pole Laminations to Andritz Hydro for making major components of Pumps used in Kaleshwaram lift irrigation project.

PEL has also supplied parts for making 12,000 HP motor to Toshiba Mitsubishi Electric Industrial System Corporation (TMEIC), to be used in Steel plant. Such business opens up a niche segment for PEL.

Union Budget 2018-19 Interim Budget 2019-20
The Government earmarked a capex of Rs. 1,22,000 crore for expansion of National Highways, ensuring seamless connectivity of interior, backward and border areas of the country through Bharatmala Pariyojana programme. Of the expansion planned of National Highways, more than 9,000-km length was achieved in 2017-18. Under Pradhan Mantri Krishi Sinchai Yojana (PMKSY), Rs. 6,000 crore is to be spent on 48 irrigation projects under the Accelerated Irrigation Benefits Programme (AIBP) and command area development. The allocation for the PMKSY increased by 27.5% to Rs. 9,429 crore. Rs. 2.04 lakh crore outlay allocated for around 99 smart cities in the country that are under various stages of project completion. India is the fastest highway developer in the world 27 kms of highways built each day Stuck projects completed - Eastern Peripheral Highway around Delhi and Bogibeel rail-cum-road bridge in Assam and Arunachal Pradesh Clean Rivers, safe drinking water to all Indians and efficient use of water through micro-irrigation

Source: PIB


The Government of India has undertaken various measures and policy changes to meet the rising demand for power in the country. Some of these include Rural Electrification under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY); Saubhagya - Pradhan Mantri Sahaj Bijli Har Ghar Yojana for universal household electrification by March 2019 and Ujwal Discom Assurance Yojana (UDAY) for a sustainable solution to the operational and financial efficiencies of DISCOMs across the country. These measures by the Government have shown results with the power supply in the country improving remarkably. The growth in the availability of electricity has surpassed the growth in the requirement of electricity. During the period extending between April to December 2017, the peak and energy shortage has been a 2% and 0.7% respectively, as per the Ministry of Power Annual Report 2017-18. The total electricity generation in the country has increased from 771.6 Billion Unit (BU) in 2009-10 to 1,141.988 Billion Unit (BU) during April-February (2018-2019). The electricity generation target of conventional sources for the year 2018-19 has been fixed as 1,265 Billion Unit (BU), comprising of 1,091.500 BU thermal; 130.000 BU hydro; 38.500 nuclear; and 5.000 BU import from Bhutan. The electricity generation in the year 2018-19 is expected to grow at around 4.87% over actual conventional generation of 1,206.306 BU for 2017-18.

According to Central Electricity Authority (CEA), the total installed power capacity in India stands at 3,50,162 MW, as on March 2019.

This comprises of 63.7% thermal, 54.6% coal, 13% hydro, 1.9% nuclear and 21.2% renewable energy sources. The renewable energy sources include Small Hydro Project, Biomass Gasifier, Biomass Power, Urban & Industrial Waste Power, Solar and Wind Energy. The Government of India has undertaken a two-pronged approach to cater to the energy demand of its citizens, while ensuring emissions minimum growth in CO2 and its impact on the ecosystem.

Generation and growth in conventional generation in the country during 2009-10 to 2018-19

Year Energy Generation From Conventional Sources(Bu) % of Growth
2009 10 771.551 6.6
2010 11 811.143 5.56
2011 12 876.887 8.11
2012 13 912.056 4.01
2013 14 967.150 6.04
2014 15 1,048.673 8.43
2015 16 1,107.822 5.64
2016 17 1,160.141 4.72
2017 18 1,206.306 3.98
2018 19* 1,141.988 3.77

* Upto February 2019 (Provisional) (Source : CEA)

On the power generation side, the Government is promoting greater use of renewable sources in the total energy mix, mainly through solar and wind, and at the same time shifting towards super critical technologies for coal-based power plants.

(Source: Ministry of Power)

In its roadmap, the Government plans to achieve 175 GW (gigawatts) capacity in renewable energy by 2022, which would include 100 GW of solar power and 60 GW of wind power. The Union Government of India is also preparing a ‘rent a roof policy for supporting its target of generating 40 GW of power through solar rooftop projects by 2022. The Governments focus on renewal energy provides PEL with opportunities in the clean energy and wind power segment. PEL is working with Siemens, Gamesa, Suzlon, Regen, etc. for supply of various components for windmill generators. PEL is geared up to supply products compliant to IE-2, IE-3 and IE-4 Energy Efficiency norms also.

Total Installed Capacity
Fuel MW % of Total
Total Thermal 2,22,927 63.7
Coal 1,91,093 54.6
Lignite 6,260 1.8
Gas 24,937 7.1
Oil 638 0.2
Hydro (Renewable) 45,399 13.0
Nuclear 6,780 1.9
RES* MNRE 74,082 21.2
Total 3,50,162

* Installed capacity in respect of RES (MNRE) as on 31.01.2019.RES (Renewable Energy Sources) include Small Hydro Project, Biomass Gasifier, Biomass Power, Urban & Industrial Waste Power, Solar and Wind Energy.

(Source: CEA)

Highlights of Interim Budget 2019-20 International Solar Alliance

To promote renewable energy First treaty based international inter-Governmental organisation headquartered in India Installed solar generation capacity grown over ten times in last five years

Oil & Gas

India is the second largest oil refiner in Asia, as on September 2018, and third largest energy consumer in the world. The Government has undertaken various policy measures to meet the growing demand, including 100% FDI in many subsegments of the sector such as natural gas, petroleum products, and refineries, among others. According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted FDI worth US $ 7.00 billion between April 2000 and December 2018. In 2018, the total refining capacity of India stood at 5,010 thousand barrels per day (mbd), which is 15% of Asias total refining capacity in 2018. According to Global Datas report: ‘India Crude Oil Refinery Outlook to 2023, Indias total refining capacity is expected to grow at an average annual growth rate (AAGR) of 5.3% to 6,525 mbd in 2023. India plans to raise the share of natural gas in its primary energy basket. In the next few years, the country plans to increase the share of natural gas in the basket to 15% from the current 6%. Indias use of natural gas is expected to grow at 4.9% annually through 2040 to 171 billion cubic meters, just behind China. The Government of India is also planning to set up around 5,000 compressed biogas (CBG) plants by 2023. These plants meant for extracting biogas from agricultural residue, cattle dung and municipal solid waste will have an estimated annual CBG production of 15 million tonnes. Moreover, the Government plans to set up a gas exchange in order to bring market-driven pricing in the energy market of India. In 2018, the Government of India approved National Policy on Biofuels. The expected benefits of this policy are health benefits, cleaner environment, employment generation, reduced import dependency, boost to infrastructural investment in rural areas and additional income to farmers.

(Source: Press Information Bureau, Bloomberg)

The favourable regulatory developments and Governments various initiatives towards making India pollution free are expected to provide PEL significant opportunities in the Oil & Gas sector.


India is worlds 4th largest automobile market with a production of 3,09,15,420 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-March 2019 as against 2,90,94,447 in April-March 2018, registering a growth of 6.26% over the same period last year, according to Society of Indian Automobile Manufacturers (SIAM). The vehicles on Indian roads are estimated to consist of 79% two-wheelers, 14% four-wheeler cars, 4% three-wheelers and 3% buses and trucks, according to a NITI Aayog report. Over the last decade, a slew of factors has created an opening for Electric Vehicles (EVs) to enter into mass market in the country. One of the key factors leading to this includes, Indias commitment to cut GHG (greenhouse gases) emissions intensity by 33% to 35% below 2005 levels by 2030. Amongst others, including advancements in renewal energy, rapid urbanisation, rise of GPS-enabled devices, advances in battery technology and outlook on energy security. The EV revolution would enable the country to lower its carbon emissions, while providing convenient and cost-effective mobility.

With the transport sector currently responsible for 16% of global GHG emissions, the Government is in the process of establishing an ecosystem for EVs. In March, the Government announced Rs. 10,000 crore FAME-II scheme to bring clarity and policy stability, and to provide a big push to popularise EVs in India. Through this scheme, the Government plans to support 10 lakh electric two-wheelers, 5 lakh three-wheelers, 55,000 four-wheelers and 7,000 buses. As part of the Vision for India of 2030 announced during the Interim Budget 2019-20, the Government aims at making India pollution-free by leading transport revolution with EVs and focus on renewables. Under the National Smart Grid Mission, the Government plans to monitor the implementation of policies and programmes related to Smart Grid activities in the country. The mission envisages the implementation of Advanced Metering Infrastructure (AMI), medium sized micro grids, distributed generation EV charging infrastructure, among others. With the enhanced focus of Government towards electric mobility, the lamination business of PEL would grow significantly. The lamination is a core component of electric motors and impact the overall performance of the vehicle. PEL has supplied components for Electric Motors for Buses manufactured by multinational joint ventures and the Buses are running on trial basis presently. PEL would enjoy the first-mover advantage in this segment with its innovative products.


The key financial highlights are given below

Year 2018-19 2017-18 Growth (%)
(Rs. in crores) (Rs. in crores)
Revenue 624.48 381.74 63.59%
EBIDTA 90.10 54.58 65.08%
Total Comprehensive Income 22.87 11.54 98.18%

PELs total income for the FY19 grew by 63.59 % to Rs. 624.48 crore from Rs. 381.74 crore over last year. The exponential growth in revenues was on the back of strong domestic and export demand. Our products developed for the customers engaged in the modernisation plan of the Indian Railways have been providing the required traction to our growth. Our Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) for the FY19 stood at Rs. 90.10 crore, up by 65.08%. The Total Comprehensive Income was up by 98.18% to Rs. 22.87 crore in FY19 from Rs. 11.54 crore in FY18.

With the implementation of ‘Mega Project, we have adopted advanced manufacturing techniques and automation. This has helped us in improving our margins and operational efficiencies. On CAGR basis over last two years, we have grown our top-line by 47.02% and bottom-line by 105.80%. As on 31st March 2019, our debt levels were Rs. 248 crore. Considering that we work in capital goods industry which is working capital intensive, our present debt levels are adequate.

Particulars FY19 FY18 Change % Reasons
Inventory Turnover (Days) 61.00 118.00 -48% Reduction in holding period enables better inventory management and effective utilisation of funds to maintain the adequate inventory level.
Debtors Turnover (Days) 85.00 103.00 -17% Debtors Turnover improved primarily on account of advance receivables of export as against the agreed credit period.
Interest Coverage Ratio 3.90 3.16 23% Interest Coverage Ratio improved on the back of better financial performance in FY 2018-19 as compared with FY 2017-18.
Current Ratio 1.10 1.08 2% Current Ratio improved on account of effective management of working capital funds.
Debt Equity Ratio (DER) 1.41 1.65 -15% Debt Equity Ratio improved due to timely repayment of long-term loans and supported by accumulated profits.
PBT to Net Sales (%) 6.48 4.31 51% Profitability ratios improved significantly due to substantial increase in the turnover and better achievement of operation profit.
PAT to Net Sales (%) 3.81 2.98 28%
Return on Net worth (%) 13.00 7.47 74% Return on Net worth improved due to twofold rise in Total comprehensive income to Rs. 22.87 crore in FY 2018-19 as compared with previous year of Rs. 11.54 crore.

Human Resources Development and Industrial Relations

At PEL, we enjoy an excellent track record of cordial and harmonious industrial relations. We are developing digitally integrated resource management systems and processes aimed at enhancing value, capability and vitality of our people and organisation at large. We believe in an inclusive growth and have been nurturing our talent to innovate and grow together with us. We have reworked our internal policies to make them more employee-friendly. Some of the measures undertaken, include flexible timing and reduction of mandatory working hours per month to give employees a good work-life balance.

We are on a constant endeavour to improve safety and manufacturing standards at all our plants and offices. We have been incorporating best-in-class engineering standards in the design and project execution. Besides, we also undertake various procedures to ensure environmental protection. There were 916 employees on the rolls as on 31st March 2019.


External Risk Factors Economic Environment & Market Conditions: Risk Identification:

The Company operates its business in the global environment which is volatile, uncertain, complex and ambiguous. The Company, in order to expand globally is continuously in search of new markets, new products, resources, lower production costs and new customers, amongst other opportunities. It is also facing growing complexity in terms of the varied business practices and additional risks faced from new political and economic environments. The management of such risks can ensure new markets and better profits. The economic environment of the Company keeps changing and the Company must move in tandem. Inherent risk of doing business in international markets must take into account economic, environmental, exchange control, tariffs, trade barriers, longer payment cycles and growing technological issues and increased competition.

Risk Mitigation: PEL has broad based its customer basket into domestic and export geographies, multiple customers and diverse end use applications to mitigate the market, customer and business cycle dependence and ensure stability in operations.

On the purchasing front too, the Company has also broad-based its vendors overseas and domestic purchases for raw material in order to maintain a good balance. Historically, the strength of its relationship with its vendors and customers has resulted in significant recurring revenues from existing customers.

Political Environment

Risk Identification: Any adverse change in the political environment of the customer countries, will have an impact on the growth strategies of the Company. Environmental and economic scanning and panning is an ongoing exercise.

Risk Mitigation: Risks that are likely to emanate are managed by constant engagement with the Government, reviewing and monitoring the countrys industrial, labour and related policies and involvement in representative industry-bodies.


Risk Identification: In an increasingly global market, the Company faces rising levels of competition. Risk of competition is inherent to all business activities. The Company faces competition from the existing players operating in the segment in which the Company operates. Considering that, the business where the Company operates is in the high growth phase, there is always an inherent risk that the existing competition may get accentuated with the advent of new players.

Risk Mitigation: Significant entry barriers will help the Company to retain its market share as it would be a long drawn out process to establish a new enterprise by investing huge resources.

The fact that most of the customers have been with the Company ever since its inception demonstrates the Companys values and the commitment to quality deliverables and good relationships enabling the Company to retain its market share. PEL believes that it is strongly placed to consolidate its market position as a leading supplier of laminations and allied products due to its competitive strength which include: One-stop Engineering Solution Provider- end to end value added products under one roof.

Customer centric approach. Track record of high quality products and order execution. Specialised Industry Expertise. Ethical values.

Strength to cater to long working capital cycle needs of the industry.

Revenue Concentration and liquidity aspects Risk Identification: Each business area such as laminations, castings, stampings, job-work has specific risk which affects profitability and liquidity.

Risk Mitigation: The risks are identified for each product so as to mitigate them and contribute to total revenue, profitability and liquidity. However, the Company has identified revenue contribution by each segment of business such as laminations, stampings, castings and machining and approximately balances the risk associated with Revenue Concentration and liquidity aspects.

Technology Obsolescence Risk Identification: The Company strongly believes that technological obsolescence is a practical reality. Pro-active technology upgradation in tune with the changing times has always been receiving focussed attention of the management.

Risk Mitigation: Technological obsolescence is evaluated on a continual basis and the necessary investments are made to bring in the best proven technology. A constant endeavour is being made to ensure that its plants are equipped with state of art technologies in order to maintain its commitment to quality deliverables in time and least cost and best service to secure cost competitiveness. The Company has developed excellent in-house technical expertise in the production team. It is constantly on the lookout for latest state of art technologies which would increase the productivity and reduce the cost.

As the Companys products are made to order and are critical inputs in the electrical and engineering industries as per customer design, the management does not perceive any risk on account of product obsolescence.

Legal & Contractual Compliance Risk Identification: Legal risk is the risk in which the Company is exposed to legal action. As the Company is governed by various laws and the Company has to do its business within the framework of law, the Company is exposed to legal risk.

Risk Mitigation: The Company operates its exports business primarily in US, Germany and Mexico where investment flows are free and where well-established political, business and legal frame works are in place.

In the event of the Company exploring business prospects in countries where the political systems are still evolving, it would recognise the possible frequent changes in investment and economic policies that might occur in those countries and finalise the business plans with the enterprises located therein only after carefully considering the pros and cons of the business decisions. As regards business on the domestic front, the Company makes representations to the Government at the centre and state as the case may be as part of the collective effort of the business fraternity through trade associations, chambers and federations in case policies announced are likely to cause impediments to the business. The Company will also examine and explore ways and means to minimise the tax risks through consultations and deliberations with experts in the relevant field to ensure that the tax frame work is properly put in place. The Company has established proper internal financial controls through periodic Internal Audit, Statutory Audit, Tax Audit, ISO Audit / Transfer Pricing Audit and Customer Quality Audit. The Company has also framed proper system to ensure compliance with provisions of all applicable laws through periodic secretarial audit. Contracts with customers typically contain clauses / restrictions / measures and non-adherence of which could result in litigation. Additionally, there will be other obligations and general corporate legal risks.

PEL has an experienced team of professionals, who focus on evaluating the risks involved in a contract, ascertaining its responsibilities under the applicable law of contract, restricting its liabilities under the contract and covering the risks involved so that they can ensure adherence to all contractual commitments.

There may be instances of defaults by Customers in fulfilling contractual obligations as a result of which the Company may face financial losses. Similarly, defaults by the Company in fulfilling one or more contractual obligations due to reasons such as misrepresentations, breach of warranties etc cannot be ruled out. The Company has developed proper system to ensure that proper drafting of the contract and adequate indemnity clauses are incorporated in the contracts entered into with one or more parties. In addition, internal controls from technical team and strict supervisions and checks on execution of contracts and delivery are undertaken.

Fluctuations in Foreign Exchange Risk Identification: The Company is exposed to substantial risk on account of currency movements in global foreign exchange market. The exchange rate between the rupee and the currency in other countries has changed substantially in recent years and is always fluctuating. The objective of foreign currency risk management is to protect cash flows and profit. The policy for foreign currency risk management ensures that the finance department continuously tracks movement of foreign currencies, avails the services of experts, and hedges the risk through appropriate mechanisms such as forward contracts/derivatives, margins from volatility on account of fluctuations in exchange rates.

Risk Mitigation: The functional currency of the Company is the Indian Rupee, however, a major portion of the business is transacted in US Dollars and accordingly, faces foreign currency exposure for export sales and purchases from overseas suppliers in foreign exchange. The risks are measured through the net open position i.e. the difference between un-hedged outstanding receipt and payments. The risk can be controlled by a mechanism of "Stop Loss" which means the Company goes for hedging (forward booking) on open position when actual exchange rate reaches a particular level as compared to transacted rate. The risk on account of foreign currency is managed through hedging. PEL risk management strategy is to identify risks it is exposed to, evaluate and measure those risks, decide on managing those risks, regular monitoring and reporting to management. The risk management policies with regard to foreign exchange fluctuation is approved by senior management and include implementing hedging strategies for foreign currency exposure, specification of transaction limits, identification of personnel involved in execution, monitoring, controlling such transactions. Further the Company is protected on its export pricing with its customer as the unit cost of the product gets adjusted to the exchange fluctuation of the previous quarter. Therefore practically, there is open exchange risk only for one quarter volume.

Internal Risk Factors Operational Efficiency

Risk Identification: Operational Efficiency is an integral part of an organisation. Continuous productivity increase, increases the competitiveness of the organisation. If not attended to, the inevitable consequences include increased cost, undermined profitability and pressure on growth. The Risk is assessed by evaluating the potential for incidents along with the degree of impact that could have on an organisation should they occur.

Risk Mitigation: The Company is constantly working to limit the operational risks which requires the combined efforts of all business and support functions, and the tools required to be developed. Apparent trends are analysed, and various operating groups combine into task forces to address these. The business continuity plan is reviewed annually by each unit.

Safety , Health and Environment Risk Identification: Safety, health and environment constitutes an important aspect in organisations growth. It can ensure: Increased safety and environmental performance Ensure sustainable development Improve financial performance Enhance Reputation

Risk Mitigation: PEL endeavours to protect the environment in all its activities, as a social responsibility. Extensive plantations of trees around plants are undertaken for green belt development to keep the pollution at lowest level.

The Company values the safety, health and environment as an apex legal committee monitors the same. PEL is EMS 14000 certified.

Human Resource Management Risk Identification: The Human Resource constitutes the most important asset and strength of the Company. The risk management measures relating to human resource is therefore necessary to cover all risks related to employees like competence enhancement, growth, career, succession planning and reduce attrition in key result areas and among key managerial personnel. The measures deals with the nature of risk involved in relation to employees, objectives of risk management and measures to manage risk.

Risk Mitigation: PEL ensures that right person is assigned to the right job and that they grow and contribute towards organisational excellence at all levels. Risks in matters of human resources are sought to be minimised and contained by following a policy of providing equal opportunity to every employee, inculcate in them a sense of belonging and commitment and also effectively train them in spheres other than their own specialisation. Companys ability to execute projects and to develop new customers depends largely in its ability to attract, train, motivate, develop a talent pool and retain highly skilled professionals, particularly key managerial personnel in manufacturing side such as technical personnel, plant managers and marketing officers.

Companys growth has been driven by its pool of talented human resources and the ability to engage them. To attract, retain and motivate the entire team, PEL seeks to provide an environment that rewards entrepreneurial initiative and continuous learning, which fosters collaboration and performance. Employees are encouraged to make suggestions on innovations, cost saving procedures, exchange of ideas related to manufacturing procedures etc.


As a business philosophy, our management believes in growth with a strong governance system. At PEL, we have a proper and adequate system of internal controls commensurate with our size and business operation to ensure timely and accurate financial reporting in accordance with applicable accounting standards, safeguarding of assets against unauthorised use or disposition and compliance with all applicable regulatory laws and Company policies. Our Internal Auditors review internal control systems on a regular basis to achieve effectiveness into the system. Internal audit reports are also reviewed by the Audit Committee of the Board.

The Audit Committee reviews the internal audit reports and the remedial measures taken by the concerned departmental heads in the light of audit observations. The Statutory Auditors also scrutinises the internal audit report as part of their statutory audit functions.

The Statutory Auditors also conduct a limited review as part of the listing obligations and the reports are placed before the Audit Committee and forwarded to the regulatory authorities. The observations of the Audit Committee with regard to the efficacy of the audit report and the effective remedial measures that have been taken by us are placed before the Board for consideration.


At PEL, we plan to further consolidate our presence in the established markets and align ourselves to focus on new growth prospects, ably supported by our longstanding presence in the market, strong expertise, vast product mix and ‘under one roof strategy. We have undertaken the giant leap into the next phase of growth with the new identity, and focus to be an integrated engineering solutions provider. There are a number of initiatives undertaken by us to support the growth, and create value for shareholders.

Some of these initiatives are

A contract from GE India amounting to Rs. 750 crore received to supply traction motor related products, along with some other products to be used in locomotives for catering to the requirements of Indian Railways. The production against this contract has come in full swing from 2018-19.

Machined casting business generated significant interest from customers such as GE India, Weg and Wabtech. Plant 4 has been set up at Hyderabad with machining capabilities of large metal components. The commercial production at the plant started in 2017 and is running at optimal capacity.

Started new facility in Aurangabad with both laminations and machining capabilities which began operations in 2018. The new plant deploys some of the latest manufacturing techniques, including Robotics, Machine Learning, IoT, etc.

Focus on improving product mix by supplying more value-added products for critical applications Hub and spoke model of manufacturing with the aim to undertake last stage value addition closer to consumption centers.

Opportunities Economic Optimism

A slew of factors will act as a catalyst towards the core sector growth in India: A stable economic environment Governments push towards infrastructure development and industrial activity Initiatives such as ‘Power for All, ‘Make in India and ‘Housing for All Measures to streamline business and investment environment Make India pollution free by leading transport revolution with Electric Vehicles and focus on Renewables We primarily cater to core sectors of the Indian economy. The growth in these sectors is directly related to the health of the economy, and therefore, critical for the country Moreover, the ongoing trade tensions among major economies is expected to provide tactical opportunities for us. Currently, China commands almost 90-95% of windmill parts supply worldwide. At PEL, we expect this sector to bring much significant opportunities for us under the current scenario. The technological shift to EV and thrust by Government of India is a huge opportunity ahead of us.

Geographical Relocation

At PEL, we have set up our own facility at Aurangabad, Maharashtra. The presence in Maharashtra has brought us closer to the customers and source of raw materials. This geographical relocation significantly reduced our logistics and operational costs. Maharashtra accounts for nearly 60% of our domestic market supplies.


We are Indias first commercial manufacturer of laminations to be certified by BVQI of UK for ISO 9002. The long-standing customer relationship testifies our high product quality and stringent systems.

Value Creation

Our integrated operations provide us an edge over the competition. The under one roof and hub and spoke strategy has garnered significant value to us across various stages of production from lamination and machining, to complete value-added products.

Product Mix

We have developed 4,500+ unique solutions till date.


While we are strategically positioned to utilise our strengths in leveraging the underlying industrial opportunities, we also take into account certain potential threats, which may impact the smooth running of the business operations. Some of these include: Evolving industrial trends Rising competition scenario Emerging customer preferences Potential disruptions in supplies Regulatory changes Global Trade War Liquidity crunch in India