sterling wilson pvt ltd Management discussions

STERLING AND WILSON LIMITED (FORMERLY KNOWN AS STERLING AND WILSON PRIVATE LIMITED) ANNUAL REPORT 2010-2011 MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONS: The business environment in the Domestic market showed signs of recovery only in the second half of the current fiscal due to the measures initiated by the Government to propel growth through planned investments in infrastructure projects. The weak market sentiments and stressed liquidity conditions impacted the order inflows from all segments of the market and the investments in ongoing projects in the first half. The investment in IT Infrastructure is seeing a slow revival while the commercial real estate still remains in a protracted slump. Nevertheless, the Company has shown an increase of 17% in the order booked as compared to last fiscal as it focused on the infrastructure and other sectors. The Companys move to align with the fast growing infrastructure projects and Power Transmission & Distribution Projects provided the critical mass to the order book and enabled the Company to marginally improve the turnover for the year over last year. The profit after tax was lower than last year at Rs.27.27 crores mainly due to margins getting squeezed due to a very competitive market, cost overruns consequent to prolonged implementation of project investments and overheads built-up to expand the activities. Poor liquidity in the system lead to an increase in working capital requirements and hence significant increase in borrowing costs. STRATEGIC INITIATIVE: The Company ventured into EPC in power distribution and transmission through acquisition of 98% stake in PSC Engineering Private Limited. (PSC) and as a sequel to this decision and to effectively participate in mega projects, the Company proposed to amalgamate PSC with the Company. The Company is drawing up plans to venture into developing markets as MEP solution provider. OUTLOOK FOR 2010-11: The first quarter has witnessed a visible change in the investment climate with industry spearheading expansion resulting in robust order book position as of end June 2010. The challenge of over built commercial real estate still remains and is likely to take another 12 to 18 months to return to normalcy. The Companys focus on fast growing infrastructure segment including EPC is expected to the fill the gap created by shrinking size of the traditional markets for MEP business. The company should have a decent growth in turnover during the current year. The strain on margins as well as on working capital will continue to be a challenge during the year. HUMAN RESOURCE: The Company has retained some of the best talents in the industry through training programmes in leadership development for its management team and upgradation of skills. TECHNOLOGY & INTEGRATION: The Company has successfully implemented the SAP, ERP system which is expected to improve the overall efficiencies in areas of project implementation, cost and credit control etc.