Salasar Techno Engineering Ltd Management Discussions.


Global Economic Outlook

The global economy appears to be undergoing a stable growth. The world economy is projected to expand at a steady pace of 3 per cent in 2019 and 2020. Growth rates in many developed economies have risen near to what is widely considered their potential, while unemployment rates have fallen towards historical lows. Among the developing economies, the East and South Asia regions remain on a strong growth trajectory, while many commodity-exporting countries are continuing a gradual recovery. In 2018, global economic growth remained steady at 3.1 per cent when calculated at market exchange rates, or 3.7 per cent when adjusted for purchasing power parities. A fiscally induced acceleration in the United States of America offset slower growth in some other large economies, including Argentina, Canada, China, Japan, Islamic Republic of Iran, Turkey and the European Union. Despite these slowdowns, economic growth accelerated in more than half of the worlds economies in both 2017 and 2018.

There are growing signs that global growth may have reached a peak. Estimates of global industrial production and merchandise trade growth have been tapering since the beginning of 2018, especially in trade-intensive capital and intermediate goods sectors, signaling weaker investment prospects. Several developed economies are facing capacity constraints, which may restrict growth in the short term.

At the global level, growth is expected to moderate slightly to 3 per cent in both 2019 and 2020. Slower growth in China and the United States will be largely offset by continued recovery in some developing regions and economies in transition that have been hardest hit by the commodity price collapse of 2014/15.

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Indian Telecom Sector

During the last 12 months, the telecom industry has seen a lot of ups and downs. The tariffs have become a lot cheaper, self-care applications of telcos are now actually very useful, and services provided by operators have improved as well. Having surpassed 119 crore subscribers in September 2018, the Indian wireless industry is now the second largest in the world by number of subscribers and ranks second in terms of total internet users. Over the past couple of years, the Indian telecom industry has been going through a paradigm shift from a voice-centric market to a data-centric market. The next growth opportunity will be in mobile internet – where the industry is likely to add 500 million new internet users over the next five years, given the availability of affordable smart-phones and lower data costs. However, intensified competition following the entry of Reliance Jio (in 2016) seems to have resulted in consolidation in the industry.

The last decade has seen a rapid increase in tele density largely as a result of liberalization of the telecom sector and creation of a market through appropriate policy and regulatory measures. These measures led to the achievement of price levels where the cost benefit ratio suited large masses of urban population. On the supply side the service providers ensured rapid growth of the network capacity to handle the increase in the subscriber numbers ensuring that a clear business case was established for them. In order to bridge the growing digital gap between the urban and rural India, it is necessary that a similar growth equation is created for rural India, both for the service providers as well as for users. However, unlike the urban masses who were familiar with the telephone even prior to liberalization, the majority of the potential hundred million new rural subscribers will be first time users and therefore, special efforts through awareness programs, customized value addition, innovative marketing & pricing will be required so that they identify the telephone as being in the category of other basic needs like water, electricity, road etc.

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Indian Power Sector

The power sector in India is witnessing exponential growth like never before. With a total installed power generating capacity of 3,46,048 MW as of October 2018, India has emerged as the worlds third-largest electricity producer.

Further, a total capacity addition of 58,384 MW from conventional sources has been envisaged for the period 2017-2022, consisting of 47,855 MW of coal-based power stations, 406 MW of gas-based power stations, 6,823 MW of hydro power stations and 3,300 MW of nuclear stations. In addition, there has been a big thrust by the government for setting up renewable power generation capacity of 175 GW by the year 2022.

According to the National Electricity Plan (NEP) report published by the power ministrys planning wing, Central Electricity Authority, such huge project executions will attract an investment of Rs 11,55,652 crore in the power generation sector over the five-year period between 2017 and 2022.

The total fund requirement of Rs 11,55,652 crore for 2017-22 includes Rs 8,52,804 crore investment in projects is likely to be commissioned during this period, and the Rs 3,02,848 crore expenditure needed with respect to advance action for projects is likely to be commissioned in the next five-year period (2022-27).

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Indian Market Overview - Transmission Towers

India being a developing nation, the demand for electricity to support economic growth is rising continuously. Thus, there is a need for substantial growth in the transmission sector to support the growing load and to provide connectivity to generation projects – especially the renewables.

Fortunately, due to increased focus on this segment in the past years – the transmission sector has witnessed a significant growth in the country. Transmission towers are an integral part of a transmission network that work as the main supporting unit of overhead transmission lines used to carry high voltage AC and DC systems, and keep them at a safe height above the ground.

There is a need to install new transmission and distribution infrastructure to keep pace with trends as well as replacement of ageing infrastructure. All these factors are expected to drive the growth of the transmission tower market in the country. India has emerged as the second largest market after China for transmission towers, contributing to over 15% of the global market. The transmission tower market in the region is mainly driven by new investments to develop a new age grid owing to increasing urbanization and industrialization in the region. Inorganic growth, coupled with extensive fund flow towards technology-based R&D to develop energy efficient, ergonomic & economic units, have been the key strategies integrated by the leading industry players.

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Salasar Techno Engineering Ltd., incorporated in 2007, provides customized steel fabrication and infrastructure solutions in India. The Company provides 360-degree solutions by carrying out engineering, designing, fabrication, galvanization and deployment. Its products include telecommunication towers, power transmission line towers, smart lighting poles, monopoles, guard rails, substation structures, solar module mounting structures and customized galvanized & non-galvanized steel structures.

Salasar Techno Engineering Limiteds services include providing complete engineering, procurement and control for projects such as Rural Electrification, Power Transmission Lines, and Solar Power Plants.

The Company is among the leading manufacturers of telecom towers in India with more than 25,000 towers since inception. The Company has three state-of-the-art manufacturing facilities located in Hapur, Uttar Pradesh.


The consolidated performance of the Company for the financial year ended March 31st, 2019, is as follows:

Total revenue from operations at Rs. 654.88 crore for the year ended March 31st, 2019, as against Rs. 503.93 crore for the corresponding previous period, an increase of 29.95%, mainly on account of increase in revenues across the Telecom Tower, Transmission, and Utility Poles segments.

The cost of raw materials for the financial year ended March 31st, 2019 were Rs. 526.02 crore as against Rs. 386.64 crore for the corresponding previous period, an increase of 36.05%.

The employee expenses for the financial year ended March 31st, 2019 were Rs. 28.03 crore as against Rs. 22.96 crore for the corresponding previous period, an increase of 22.08%.

The other expenses for the financial year ended March 31st, 2019 were Rs. 27.47 crore as against Rs. 31.12 crore for the corresponding previous period, a decrease of 11.74%.

The EBIDTA (earnings before interest, depreciation and tax) was Rs. 73.36 crore for the year ended March 31st, 2019, as against Rs. 54.02 crore for the corresponding previous period, an increase of 35.81%.

The depreciation for the financial year ended March 31st, 2019 was Rs. 4.6 crore, as against Rs. 3.86 crore for the corresponding previous period, an increase of 19.19%.

The EBIT (earnings before interest and tax) was Rs. 69.62 crore for the year ended March 31st, 2019, as against Rs. 51.39 crore for the corresponding previous period, an increase of 35.46%.

The interest for the financial year ended March 31st, 2019 was Rs. 16.32 crore as against Rs. 8.42 crore for the corresponding previous period, an increase of 93.89%.

The EPS (Earning Per Share) for the financial year ended March 31st, 2019 was Rs. 25.04 for a face value of Rs 10 per share, as against Rs. 24.21 for the corresponding previous period.


As on March 31st, 2019, the consolidated net worth stood at Rs. 189.44 crore, while the consolidated debt was at Rs. 150.28 crore.

The cash and cash equivalents at the end of March 31st, 2019 were Rs. 1.83 crore.

The total debt to equity ratio of the Company stood at 0.79 as on March 31st, 2019.

The Company has been rated ‘Care BBB+ for Long Term Borrowing and ‘CARE A2 for Short Term Borrowing by CARE ratings.


Salasar Techno Engineering operates primarily in four business verticals, viz., Telecom Tower, Transmission, EPC and Poles.

Telecom Tower Business

The Company has emerged as Indias preferred Tower supplier within a short period of time. Our telecommuni- cations towers and monopoles are designed as per time-tested Ramboll designs, in-house IIT certified designs, or tailored as per customer designs.

• The total revenue from this segment for the year ended March 31, 2019 was Rs 397.26 crore as against Rs 275.53 crore for the corresponding previous period.

Transmission Business

• This vertical can be further sub-divided into EPC business, turnkey projects, and supplying structures to other EPC contractors.

• The total revenue from this segment for the year ended March 31, 2019 was Rs 200.23 crore as against Rs 155.09 crore for the corresponding previous period, an increase of 29.1%.

Solar Structures

• Salasar is in line with the Indian governments focus on sustainable development through the use of the countrys abundantly available solar energy. The Company has already supplied solar module mounting structures for over 1,000 MW of solar projects throughout the country, commissioned by industry leaders such as Mahindra Susten and NEXTracker. Salasar is dedicated towards providing its customers with the best products and creating the required infrastructure for a better world.

• The total revenue from this division for the year ended March 31, 2019, was Rs. 6.52 crore as against Rs. 37.61 crore for the corresponding previous period.

Utility Poles & Smart City Poles & other Revenues

• Steel utility poles have various commercial, industrial, as well as residential applications. Steel poles are preferred over other materials because of their durability, eco-friendliness, and ease of installation and maintenance. Salasar, with its top-class machinery and well-trained manpower, has pioneered the production of custom-made poles of the highest quality in the shortest times.

• Smart Poles play a major role in making cities safer and more manageable. Designed to look modern and aesthetic, they are equipped with technologies like LED lights, CCTV cameras, pollution sensors, Wi-Fi routers, distress buttons, road information display systems, and motion-detecting energy savers to make our cities smarter.

• This segments revenue for the year ended March 31, 2019, was Rs. 50.71 crore as against Rs. 22.13 crore for the corresponding previous period, an increase of 129%.


The Company is continuously strengthening its risk management framework which identifies and evaluates business risks and opportunities. The Company recognizes that risks need to be identified at the right time, managed adequately and mitigation plans need to be prepared to protect the interests of all stakeholders. Managing these risks actively is also a pre-requisite to achieve business objectives and enable sustainable growth of the Company. The exercise to design the risk management framework is aimed at effectively mitigating the Companys various business and operational risks. The Company has a risk management policy for identification and assessment of risks which is monitored by the Audit Committee of the Company. The Committee closely monitors the process and suggests suitable measures to mitigate the risks. The risks may be caused due to the internal or external factors and necessary precautionary measures are taken by the Company to negate the impact of probable risk.

The major risks of the Company are as follows:

Economic Risk

Companys business may be affected by changes in interest rates, Government policy, taxation and other economic developments affecting India. The Company has defined conservative internal prudential norms. We ensure a favorable debt/equity ratio, moderate liquidity, strong clientele with timely payment track record and focus on select markets to minimize the impact of adverse conditions. The Company has diversified geographically, thereby reducing its dependency on one market.

Business & Market Risk

The Company is an established player in the engineering products business and is amongst the reputed manufacturers in India. Having limited number of players in the said category, the Company believes that the risk from competition is relatively less. In the telecom tower segment, the Company is aggressively achieving market share and believes itself to be sustainable in the competitive market. However, the Company does not ignore the possibility of competition from other players. We operate in a very dynamic way and all decisions by the management are taken considering all the possibilities.

Commodity Price Risk

The Companys business is significantly dependent on the availability, cost and quality of raw materials and fuels for the construction and development of projects undertaken. The principal raw materials include steel and zinc. Prices and supply of these are varied due to economic conditions, competition, production levels, and import duties, etc. The Company passes on such impacts to its clients partially or completely, by adding price escalation clause in most of the contracts. In case of firm price contracts, the Company tries to pass on back-to-back firm price contract to its vendor/contractor and/or hedge itself through price discovery, wherever possible. It measures and manages these risks centrally and carries out periodic reviews of these risks at appropriate levels.

Regulatory Risk

If we are unable to obtain required approvals and licenses in a timely manner, our business and operations may be adversely affected. We require certain approvals, licenses, registrations and permissions for operating our business. We may encounter delays in obtaining these requisite approvals, or may not be able to obtain such approvals at all, which may have an adverse effect on our revenues. However, the Government has come up with several initiatives to boost the sector and has planned massive investments in the infrastructure sector. Industry predictions suggest that this will be the trend in the future as well and given our own experience in obtaining such permissions, we do not expect this risk to affect us materially in the coming years.

Liquidity Risk

Liquidity risk may come in the way of smooth operations of the Company due to one or the other reasons. Whenever there is blockage of funds in the hands of customers, the liquidity crunch is likely to happen. Although wholehearted support from the bankers strengthen the hands of the Company to face the liquidity risk, the company leaves no stone unturned to avoid the possibility of liquidity risk.

Execution Risk

The Company has undertaken a number of projects in the last year and several more are in the pipeline. Project execution is largely dependent upon project management skills and timely delivery by equipment suppliers. Any delay in project implementation can impact revenue and profit for that period. Our implementation schedules are in line with the plans. Emergency and contingency plans are in place to prevent or minimize business interruptions. Therefore, we do not expect this risk to affect us materially in the future. Concerns like complex tax structure, infrastructure bottlenecks, retaining talent and unprecedented natural and man-made disasters and political/social turmoil which may affect our business, remain. However, these are threats faced by the entire industry. With superior methodologies and improved processes and systems, the Company is well positioned to lead a high growth path.


• Mobile penetration: The proportion of new/unique mobile subscribers to the total population is expected to reach around 63% in 2025 from 58% in July 2018

• Increase in internet users: Rise in mobile-phone penetration along with decline in data costs is expected to add 500 million new internet users in India

• Untapped rural market: Rural tele-density reached 58.8%, while 44.6% of the total wireless subscribers are from rural market

• Exploring adjacent businesses in an evolving environment: Moving beyond traditional telecom business to wider digital consumer space like content and mobile banking solutions.

• Rise in electricity demand: The all-India demand for electricity is expected to grow from 1212BU to 1691BU by 2022 and 2509BU by 2027 representing a CAGR of 8%. The rise in power demand and consumption would lead to higher investment in transmission and distribution space. With such a huge increase in demand, India needs a large scale of investment to ensure the delivery of electricity to consumers.

• Shift towards renewable energy to push transmission capacity: The governments plan of adding 175 GW of renewable power by 2022 would require a yearly capacity addition of 15-20 GW. Given the ambitious target, it is crucial to plan for the evacuation of electricity generated. Renewable power developers have raised concerns for grid availability in the past which highlights the urgent need of expansion of grid connectivity to accomplish the renewable energy target.

• Increasing inter regional power demand - supply gap: The Indian power scenario is such that different regions of India have different power demand and availability, leading to some states being power surplus and some states being power deficit. This translated into a gap between generation and consumption pockets, which demands for higher evacuation capacity leading to increase in inter-state transmission capacity.

• Railways orders on a rapid growth; aim to double their capacity: The railway department has set forth plans for expansion, upgradation and modernization of its existing infrastructure. The railways have set a 100% electrifica- tion target by the next four years. The EPC players order book has been already surged by railway orders.


Competition from local and multinational players

• Execution risk

• Regulatory changes

• Attraction and retention of human capital


In view of the changes in the Companies Act, the Company has taken additional measures to strengthen its internal control systems. Additional measures in this regard are fraud risk assessment, mandatory leave for employees, strengthening background verification process of new joiners, whistle blower policy and strengthening the process of risk management. The Company maintains a system of internal controls designed to provide a high degree of assurance regarding the effectiveness and efficiency of operations, the adequacy of safeguards for assets, the reliability of financial controls, and compliance with applicable laws and regulations.

The organization is well structured and the policy guidelines are well documented with pre-defined authority. The Company has also implemented suitable controls to ensure that all resources are utilized optimally, financial transactions are reported with accuracy and there is strict adherence to applicable laws and regulations.

The Company has put in place adequate systems to ensure that assets are safeguarded against loss from unauthorized use or disposition and that transactions are authorized, recorded and reported. The Company also has an exhaustive budgetary control system to monitor all expenditures against approved budgets on an ongoing basis.

Recognizing the important role of internal scrutiny, the Company has an internal audit function which is empowered to examine the adequacy of, and compliance with, policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process.

Periodical audit and verification of the systems enables the various business groups to plug any shortcomings in time.

As stated earlier the Company has improved effectiveness of the risk management process wherein it evaluates the Companys risk management system and suggests improvement in strengthening risk mitigation measures for all key operations, controls and governance process. In addition, the top management and the Audit committee of the Board periodically review the findings and ensure corrective measures are taken.


The Company has Human Relations and Industrial Relations policies in force. These are reviewed and updated regularly in line with the Companys strategic plans. The Human Relations team continually conducts training programs for the development of employees.

The Company aims to develop the potential of every individual associated with the Company as a part of its business goal. Respecting the experienced and mentoring the young talent has been the bedrock for the Companys successful growth. The Companys employees age bracket represents a healthy mix of experienced and willing-to-experience employees.

Human resources are the principal drivers of change. They push the levers that take futuristic businesses to the next level of excellence and achievement. The Company focuses on providing individual development and growth in a work culture that enables cross- pollination of ideas, ensures high performance and remains empowering.

As on March 31, 2019, the Company had a workforce of 1655 people on rolls.


Telecom – The telecom infrastructure industry, with more than 5 lakh mobile towers mounted with 20 lakh BTSs, extends mobile telecommunication services to more than 1.1 billion subscribers. Undoubtedly, the Indian telecommunication sector has undergone a revolutionary transition in the last two decades to become the worlds second largest telecommunication market. The telecom infrastructure industry strongly believes that the future of Indian tower companies rests on the exponential rise in data traffic and harnessing emerging business opportunities. Further, the Governments thrust towards launch of 5G services, digital India, smart cities, Bharat Net, and the proliferation of 4G services will boost the demand for roll-out of telecom infrastructure such as fibre cable, telecom towers, small cell solutions, Wi-Fi networks and IBS. The physical infrastructure needs to be robust to meet the growing need and demand of ubiquitous connectivity.

Salasar is well positioned to leverage on these opportunities. The Companys technical tie-up with Ramboll, a leading Danish Company into designing along with majority market share in the manufacturing of telecom towers, gives Salasar an added advantage to grab this opportunity and grow our revenue manifold.

Transmission Towers- The growth prospects for the transmission sector are driven by greater emphasis on grid reliability and spread of new urban and rural load centres arising from urbanization and rural electrification. Further, the renewable sector would generate fresh potential for the transmission sector and will add to the demand for transmission towers in the coming years as these projects come up in the hinterland, and the consumer is far from place of generation, the infrastructure that needs to be set up in terms of transmission lines & substations would be huge. Sala-sars active presence in this space, and approvals from power grid in the EPC of substation and rural electrification, combined with its capabilities to manufacture solar modules mounting structure will benefit the Company to further increase its presence, and increase its share in the transmission & distribution segment in India.

Railways- The outlook for the railways sector is very positive, with a rapid growth path anticipated. The Indian Government has set plans for network expansion as well as upgradation & modernization of existing infrastructure. Indian budget on railways had decoded ample opportunities for players like us. Some of the positive outcomes from the budget include an increase in capital outlay, which is a very positive indicator. Approvals from Central Organization for Railways Electrification (CORE), increasing capabilities to handle all railway related projects combined with active bidding to grab orders individually and in joint ventures, will enable the Company to increase the share of revenue from this segment over the coming years.

(Source – ibef, ministry of Power, Trai, DoT)