MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A. GLOBAL ECONOMIC SCENARIO
The global economy faced several challenges in CY 2022, marked by the escalating
Russia-Ukraine war, supply chain disruptions, inflationary pressures, and high key policy
rates by the central banks. As a result, global economic growth decelerated to 3.4% in CY
2022 from 6% in CY 2021. Global inflation remained a matter of concern in most economies,
which reached a multi-year high of 8.7% in CY 2022. Monetary tightening by the central
banks across the world helped bring the trajectory downwards. Commodity prices eased the
early gains of CY 2022 amidst supply chain issues and Chinas zero-Covid policy due to the
demand slowdown. Europe was significantly impacted by the war, which led to high energy
and food prices created by supply chain disruptions. In Q4 CY 2022, the energy crisis
improved, supported by high gas inventory levels, favourable weather conditions, and the
central banks monetary policy tightening, which eased inflation. IMF projects the global
economy to grow by 2.8% in CY 2023 before rebounding to 3% in CY 2024, though the worries
of war and high inflation still persist.
B. DOMESTIC ECONOMIC SCENARIO
India performed exceptionally well compared with the rest of the world. The Indian
economy grew by 7.2% in FY 2022-2023 as against the 9.1% growth achieved in FY 2021-2022.
Strong macroeconomic fundamentals along with a pick-up in manufacturing activity, healthy
consumption trends, moderation in oil prices, and recovery in private investment have
helped India maintain its status as the worlds fastest-growing economy underscoring its
resilience amidst global headwinds. The easing of global inflationary pressures led by
falling international commodity prices and favourable policies are expected to aid
economic growth in India. Growth will also be driven by robust domestic demand supported
by the governments continued thrust on infrastructure spending and supportive policy
schemes.
I. Petroleum Products Transformer Fluids
Transformer Fluids are indispensable in ensuring secure and seamless operations of
transformers, which play a crucial role in bolstering the power grids and augmenting power
capabilities in both rural and urban areas. These resilient fluids are engineered to serve
as both insulators and efficient heat dissipators, thereby ensuring that the transformers
operate within a safe temperature range.
Opportunities, Threats & Risks and Future Roadmap The power and distribution
transformer market in India is experiencing significant growth due to several drivers and
opportunities. Indias rapid industrialisation, urbanisation, and electrification efforts
have created a strong demand for reliable power infrastructure. Moreover, the growing
demand for energy across different end-use segments, expansion of T&D, modernisation
of existing transformers, rapid deployment of smart grid, and increasing adoption of
renewable energy sources and green transformers are also propelling the market growth.
Some of the key growth drivers and opportunities in the Indian power and distribution
transformer market are:
• Increasing Energy Demand:
Indias growing population and expanding infrastructure have led to a substantial
increase in energy consumption. The government provided a substantial impetus to the
advancement of infrastructure development by allocating Rs.10 Lakh Crore as capital
expenditure for the fiscal year 2023-2024. This will drive the need for power generation,
transmission, and distribution, which, in turn, will boost the demand for transformers.
• Government Initiatives: The Indian governments focus on initiatives such as
"Make in India", "Smart Cities", and "Power for All" aims to
enhance domestic manufacturing capabilities and ensure reliable electricity supply to all
citizens. The governments efforts to bring electricity to rural and remote areas provide
opportunities for distribution transformer installations, as they are crucial for
delivering power to the last mile.
• Renewable Energy Transition: India is progressively adopting renewable
energy sources like solar and wind power. The Indian government has formulated a strategic
initiative known as Mission 500 GW with the objective of expanding Indias renewable
energy (RE) capacity to 500 GW by the year 2030. Presently, the nation has successfully
implemented around 172 GW of capacity derived from non-fossil energy sources. Integrating
these sources into the grid requires efficient transformers to manage power fluctuations
and ensure smooth distribution.
• Modernisation of Existing Transformers:
Majority of Indias transformers and power infrastructure components are ageing and
need replacement or modernisation. This drives the demand for newer, more efficient, and
technologically advanced transformers.
• Implementation of Smart Grid:
The development of smart grids requires intelligent transformers that can handle
bidirectional power flow, manage voltage fluctuations, and support grid automation. This
opens avenues for technologically advanced transformers. Moreover, the demand for
energy-efficient transformers that reduce transmission losses and improve overall grid
efficiency is steadily expanding in India.
The transformer fluids market in India holds promising opportunities as the country
strives to meet its increasing power demands while addressing environmental concerns and
adopting technological advancements. Capitalising on these factors requires a combination
of innovation, regulatory compliance, and collaboration across the industry.
Your Company is witnessing the tangible outcomes of the aforementioned initiatives,
reflecting significant progress on the ground in terms of demand uptick. After several
years, your Company is seeing a substantial increase in customer order books within the
Power and Distribution Transformer sector, with their production capacity reserved for the
coming 12-16 months. This heightened demand extends beyond India; the export segment to
North America and other regions is also demonstrating promising growth potential. This is
attributed to Indias competitive manufacturing ecosystem for transformers, well-suited to
meet global requirements.
While your Company anticipates favourable growth for transformer fluids due to these
developments, a particularly notable resurgence is being observed in the export segment.
Three primary factors are driving this revival:
• Investments made by your Company in specific regions have started showing signs
of maturity, resulting in an increased demand for transformer fluids.
• Certain global manufacturers are currently facing challenges, prompting them to
explore alternative suppliers for transformer fluids.
• Correction in container freight issues has enabled your Company to effectively
compete in geographies that were previously hindered by shipping costs.
Alternative Fluids
Bio-Based - Your Company also produces bioTransol, a natural ester-based insulating
fluid designed for transformers. This groundbreaking product was originally launched by
Savita Polymers Limited (earlier a wholly-owned subsidiary of your Company which is in the
process of being merged into your Company), in 2015. Remarkably, it marked the first
instance of an Indian company introducing such a product to the market. With an extensive
reach, bioTransol has been applied to over 300 projects, solidifying its impact. This
product promotes environmental consciousness with a high proportion of biodegradability.
Moreover, its safety and efficiency surpass conventional options across various equipment
applications.
Your Company is actively engaged in collaborating with major national and state utility
boards, as well as Original Equipment Manufacturers (OEM) clients, to showcase the
products merits. Not only does bioTransol offer a more effective solution within its
grade, but it also embodies environmental sustainability. In an environment where global
OEMs are compelled to reduce their carbon footprint, the appeal of such products is
further enhanced.
Your Company is confident that the adoption of Natural Ester-Based Transformer Fluids
will witness substantial growth, becoming an integral component of OEM consumption.
Synthetic Based - Your Company is poised to introduce Transol Synth100, a cutting-edge
synthetic ester-based insulation fluid. This fluid represents a significant advancement in
transformer fluid technology, surpassing existing solutions across a range of parameters.
As previously discussed in earlier reports, Transol Synth100 stands as the most robust
transformer fluid to date.
As this product comes at a higher cost compared to mineral or natural esters, Transol
Synth100 finds application in highly sensitive applications such as Locomotives (Metro and
Rail), Mining, and Floating Solar projects. The overall lifecycle cost of this fluid
effectively offsets its initial investment which will serve as a key driving force in the
gradual transition from mineral to ester fluids within the ecosystem. With the launch of
Transol Synth100 in the coming financial year, your Company will achieve a remarkable
milestone, emerging as the sole manufacturer of the entire spectrum of transformer fluids
- Mineral, Natural, and Synthetic.
White Mineral Oils
White Mineral Oils undergo meticulous processing to become one of the most chemically
inert substances available. They are widely utilised in various industries, including
cosmetics and pharmaceuticals, as well as in plastic processing, elastomer production, and
rubber compounding, among other applications.
Opportunities, Threats & Risks and Future Roadmap The White Oils market in India
presents several opportunities owing to its diverse applications across industries. The
booming cosmetics, FMCG, and pharmaceutical sectors are key drivers for white oils. These
oils find application in skincare products, hair oils, and topical medications, fostering
demand due to growing consumer preferences for safe and effective ingredients. White oils
are also crucial in industrial processes, including plastics, polymers, elastomers, and
rubber compounding. As these industries continue to expand, the demand for white oils as
process aids and additives is projected to rise.
Developing premium and specialised white oil products with specific attributes, such as
higher purity levels or unique characteristics, can cater to niche markets and premium
pricing segments. Moreover, Indias manufacturing capabilities in the white oils sector
have the potential to cater to global markets. Export opportunities can arise by tapping
into international demand for these versatile oils.
Your Company is amongst the foremost suppliers of White Mineral Oils in India. With a
rich legacy spanning over 60 years, your Company has become a trusted source of supplier
to a diverse range of industries viz. Cosmetics and Hair Oils, Pharmaceutical and Topical
Ointments, as well as Polymers, Plastics, and various other applications. Your Company
continually strives to enhance its market share among both multinational and domestic
customers. By focussing on bolstering global supply chain capabilities, your Company aims
to better serve its overseas customers.
In the face of competitive pressures, particularly within the industrial-grade white
oils sector, where price considerations dominate decision-making, your Company remains
resolute in catering to quality-conscious customers both in India and abroad. A
two-pronged strategy of emphasising quality and expanding operational scale is expected to
counter these challenges while maintaining robust margins.
Automotive and Industrial Lubricants
Indias lubricant market is expected to grow at a steady Compound Annual Growth Rate
(CAGR) of 2-3% in the coming decade, with a significant portion of the demand stemming
from the industrial sector. This optimistic outlook is supported by various factors,
including Indias expanding population, moderate vehicle penetration rates, favourable
demographics, ongoing infrastructure development, and government support. Despite a
challenging external environment, high inflationary pressures, elevated input costs, and
fluctuations in foreign exchange rates, your Company showcased resilience and delivered a
strong double-digit volume growth, solidifying its position among the fastest-growing
lubricant brands in India.
This success was marked by balanced growth across all three segments: Automotive,
Industrial, and Original Equipment Manufacturer (OEM). The key drivers have been the
strong performance in the Industrial segment and the contribution from the Companys OE
partners.
Opportunities, Threats & Risks and Future Roadmap The major driver behind the
lubricant market growth has been the escalating production and sale of vehicles.
Lubricants play a pivotal role in reducing friction between critical moving components,
dissipating heat to enhance equipment durability and availability. Additionally, the
governments plans to develop new seaports and airports will positively impact the
industrial lubricant market in the country. However, the rising crude oil prices may act
as a constraint on the lubricant markets growth.
The automotive segment has consistently dominated the Indian lubricant market. This can
be attributed to the continuous increase in new motor vehicle sales, driven primarily by
the expanding working population and middle-class incomes. Furthermore, automotive
production in India is experiencing significant growth, characterised by annual growth
rates exceeding 6%. This surge in automotive production augurs well for the demand for
engine oils and other lubricants used across the automotive industry.
Despite the persistently challenging external environment marked by volatility and
intense competition, your Company remains confident of continuing its growth trajectory.
This is supported by several factors, including a strong focus on distribution network,
brand enhancement, and a positive outlook for category growth driven by enhanced
infrastructure development, increased manufacturing activity, and a rise in per capita
income leading to higher vehicle ownership.
Your Company continues to make investments in Brand Building and Business Development
initiatives to bolster automotive growth and safeguard margins. For the Industrial
segment, your Company is focussed on boosting penetration and digitisation to achieve
disproportionate growth. Within the OEM realm, your Company adopts a strategic outlook
centered around co-creating value with existing OEM partners. Simultaneously, expansion
plans involve enlisting new OEMs through comprehensive services and support encompassing
marketing, supply chain optimisation, technology, and development programs.
While the electric vehicle sector is poised for growth, there remains ample untapped
potential within the lubricants market. Your Company is poised to harness these
opportunities by continuing to drive growth in leadership and emerging segments within
both the automotive and industrial sectors.
II. Wind Power
India is one of the fastest growing economies of the world. To fuel its ongoing
development and advancements, energy demand will grow exponentially. In the midst of
global uncertainty caused by the Russia-Ukraine war and recessionary pressures, India has
shown resilience and provided strong support for climate change by prioritising
renewables. The power generation sector in India has a diverse fuel mix comprising
conventional sources such as coal, oil, and gas, along with environmentally sustainable
sources such as solar, wind, biomass and small hydro plants. Presently, Indias energy
basket is dominated by coal. Government is working towards increasing the share of
renewables in its energy basket. During the year 2022-2023, India generated 73% of its
power from coal. Central Electricity Authority (CEA) projects coals share in the power
mix to decline from 73% in 2022-2023 to 55% in 2030. This is in with Indias pledge to the
Paris Agreement i.e. to meet 50% of its energy requirement from non-fossil fuels by 2030.
India is also committed towards reducing its carbon footprint in line with the global
response to climate change. Apart from gradual decrease in oil import bills, transition to
green energy will help India address twin challenges of energy security and climate
change.
Wind will continue to play a key role to decarbonise the Indian economy and meeting the
net zero goal by 2070 set by GoI. During the year, India added 2.28 GW of wind power
capacity against 1.11 GW capacity addition during the previous year. As of 31st March,
2023, all India total installed wind power capacity stood at 42.63 GW.
Opportunities, Threats & Risks and Future Roadmap Wind power offers significant
potential to contribute towards the growth and development of Indias power sector without
impacting the fuel reserves or greenhouse gas emissions. In the global energy transition,
India is one of the keystone countries for clean energy growth. India is the
second-largest Asia-Pacific (APAC) hub for turbine assembly and key components production.
It has an opportunity to translate the global supply chain crunch caused by
Russian-Ukraine war to its advantage by boosting manufacturing capacity. The Government of
India (GoI), through National Institute of Wind Energy (NIWE), has carried out the
assessment indicating wind power potential of 695 GW at 120 metres above ground level. In
order to facilitate large scale renewable generation capacity, GoI is implementing Green
Energy Corridors (GEC) project. With this, grid integration and evacuation infrastructure
for renewable energy will get a facelift in the country as it will facilitate interstate
transmission. Repowering of old wind turbines at high wind sites with technologically
advanced higher capacity turbines, can contribute immensely in achieving the targets set
by the Government. Indias vast coastline offers immense opportunity to tap offshore wind
which will address challenges faced by on-shore installation like land acquisition and
non-availability of windy sites.
In spite of the tremendous potential, India - the sleeping wind power giant, has been
reeling under tremendous pressure and struggling to grow due to policy paralysis. The
sector faces some tough challenges across the line which if not addressed immediately, can
impede the potential growth of the industry. Lack of financial incentives, unavailability
of windy sites, Transmission infrastructure availability, Discom financial health,
regulatory constraints in open access segment, issues pertaining to scheduling and
forecasting the infirm power, hiccups in the DSM with unrealistic high prices, etc. have
resulted in challenges that are impeding the growth of the sector. REC (Renewable Energy
Certificate) market is struggling with excess supply while demand remains significantly
lower. Key reason being huge lag in RPO compliance due to lack of strict enforcement. To
add to the woes, suspension of the floor price for Renewable Energy Certificates (REC)
traded on power exchange, viability of the project has hit a roadblock. For the
Governments Renewable energy & climate targets to be met, it will require significant
institutional and regulatory interventions.
C. SEGMENT-WISE PERFORMANCE
I. Petroleum Products:
During the year under review, on standalone basis, your Company achieved sales volume
of 3,86,944 KLs/MTs as against 3,90,740 KLs/MTs achieved during FY 2021-2022. Your
Companys sales turnover increased during the year 2022-2023 at Rs.3,59,457 Lakhs against
Rs.2,91,399 Lakhs in the year 2021-2022. Your Company achieved a net profit of Rs.22,570
Lakhs during the year 2022-2023 as against Rs.26,049 Lakhs during the previous year.
II. Wind Power
The total installed capacity in Wind Power Division of your Company stands at 53.8 MW.
During FY 2022-2023, your Companys Wind Power Plants situated in the states of
Maharashtra, Karnataka and Tamil Nadu generated 85.64 MU against 83.40 MU generated in the
previous year.
D. KEY FINANCIAL RATIOS
| Particulars |
Change* |
Remarks |
| Inventory Turnover Ratio |
+7.17 |
Increase of 24% in Sales during current FY as compared to last FY |
| Interest Coverage Ratio |
-88.31 |
Interest expense increased during current FY Decrease of 10% in profit during current
FY as compared to last FY |
| Debt Equity Ratio |
NIL |
No significant change |
| Debtors Turnover Ratio |
+4.87 |
Increase of 24% in Sales during current FY as compared to last FY |
| Current Ratio |
+2.22 |
No significant change |
| Operating Profit Margin |
-26.54 |
Increase in cost of raw material in the current FY |
| Net Profit Margin |
-29.59 |
Increase in other borrowing costs on account of net loss on |
| Return on Net Worth change |
-19.48 |
currency fluctuation Increase in distribution cost during the current FY Increase in
loss on exchange fluctuation in the current FY |
* On standalone basis
E. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
Internal control systems are crucial mechanisms that are implemented by companies to
ensure the integrity of financial and accounting information, accurate financial
reporting, promote accountability, improve operational efficiency and prevent any kind of
fraudulent activities. Internal control systems further provide assistance to comply with
applicable laws, rules, regulations and ensure regulatory compliance. Effective internal
control systems in any company should consist of policies, procedures and practices which
are designed to prevent and detect errors, frauds, non-compliances and provide reasonable
assurance that specific company goals will be met. Internal audits play a critical role in
reviewing companys internal control systems for the purpose of identification and timely
addressal of any issues.
Your Company has a well-placed and adequate internal control system that is
commensurate with its size and scale of operations and which ensures all the transactions
are authorised, recorded and reported correctly. Audit Committee of your Company reviews
the Internal Audit function as a continuing exercise. Your Company has appointed Internal
Auditors to conduct periodic internal audits to check the adequacy and effectiveness of
internal control systems in areas identified by the Committee from time to time and
propose improvements thereon. The internal audit reports are considered by the Committee
at Audit Committee Meetings and any significant audit observations are brought to the
attention of the Audit Committee for its review and discussion. Thereafter, action plans
are framed by the Audit Committee along with suggestions which are then forwarded to the
departmental heads of your Company for corrective actions and compliance. The Audit
Committee at its subsequent meetings reviews the compliance on the action plans provided
earlier.
F. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS
The industrial relations in your Company remained to be cordial during the year under
review. Your Company continues to be committed towards fostering better working
environment for its employees to contribute, succeed and grow. Open training programmes
for employees skill development to enhance productivity
remain to be the focus of the Management. Continued improvement in performance,
efficiency and productivity via timely evaluation & feedback in your Companys
employee performance management system help in aligning employees efforts with your
Companys objectives, targets & goals.
|
For and on behalf of the Board |
|
Gautam N. Mehra |
| Mumbai |
Chairman & Managing Director |
| 1st August, 2023 |
(DIN:00296615) |
+91-9892691696
