Surya Roshni Ltd Management Discussions.

Section A: Company review

Surya Roshni has emerged as a reputed manufacturing conglomerate, catering to diverse consumer need in both domestic and industrial categories. Established in 1973, the Company has evolved and manifested, not just a strong brand image, but also an irreplaceable mark onto the minds and consideration of customers. Today, it is considered amongst reputed manufacturing conglomerate and is Indias largest exporter of ERW pipes and producer of ERW GI Pipes and the second largest manufacturer of lighting goods.

The Company operates across two business segments-Steel Pipes and Strips, and Lighting and Consumer Durables. Both the segments are poised to grow owing to the positive developments in the end-user industry. The future growth will be supported by the Companys strong brand presence for both the businesses in the organised segment, its locational advantage, strong distribution capabilities and innovative product offerings.

Section B: Economic review

1. Global economy

The global economy seems to be leaving the legacy of the global financial crisis of the past decade behind, as about half the worlds countries have experienced a positive growth. The Global growth accelerated to 3.7% in 2017, supported by a broad-based recovery across advanced economies and emerging market and developing economies (EMDEs). The World Economic Outlook projects the global economic growth to further touch 3.9% in 2018.

However, over the medium term, this growth will remain flat as global slack dissipates, trade and investment moderate and financing conditions tighten. The advanced economies growth is further forecasted to edge down as monetary policy is normalised and the effects of U.S. fiscal stimulus wane. The possibility of financial market stress, escalating trade protectionism and heightened geopolitical tensions continue to cloud the global economic growth prospects going forward.

In the emerging market and developing economies (EMDEs), a cyclical recovery is underway in most of the regions. With strong market sentiments, EMDEs are expected to grow by 4.5 % and 4.7% in 2018 and 2019, respectively. The upturn in these regions is expected to mature, as commodity prices plateau. Robust economic activity in EMDE regions with large number of commodity importers is forecasted to continue. However, risks to the growth outlook continue to tilt to the downside in many regions.

Stronger economic activity, expectations of more robust global demand, reduced deflationary pressures and optimistic financial markets are all upside indicators. However, structural impediments to a stronger recovery and a balance of risks that remains tilted to the downside, especially over the medium term, remain important challenges to be met in the coming years.

2. Indian economy

The Indian economy witnessed a GDP of 6.7% during 201718 and emerged as the fastest growing economy. The country became the sixth largest global economy, surpassing France, with a gross domestic product of $2.59 Trillion. The economic fundamentals continued to remain positive during the year with Index of Industrial Production (IIP) touching 4.3% and core sectors showing a satisfactory growth.

The Indian Government has taken various initiatives to strengthen policy reforms and improve the ease of doing business. These include implementation of Insolvency and Bankruptcy Code (IBC), Real Estate Regulation Act (RERA) and Goods and Services Tax (GST).The impact of sustained structural reforms is now being felt on the ground as a mammoth economy is turning around. GST, Indias biggest indirect tax reform, created a temporary disruption at the time of implementation. However, the teething problems got a quick response from the Government, leading to relatively smooth transition.

Businesses have now settled down and there is a strong broad-based recovery in the investments and consumption. Furthermore, with the elimination of inter-state barriers and implementation of e-way bill system, transport and logistics have become more competitive and less expensive. The impact of this seminal tax is now being felt in formalisation of enterprises, wider tax base and higher tax revenues. The Governments flagship project, ‘Make in India also continued to gain momentum, attracting added investments from global MNCs.

The Government has further avoided slippage in the fiscal deficit despite the rise in oil prices and has also undertaken continuous measures to keep the inflation in check. The Union Budget further stressed on improving countrys infrastructural growth, agricultural activities and strengthening the MSMEs. As such, businesses across several key sectors are experiencing firm growth indicating better capacity utilisation and higher investment expectations. With strong economic sentiments, IMF forecasts Indias growth to rise to 7.3% in 2018 (2018-19) and 7.5% in 2019 (2019-20).

Section C: Industry review

1. Steel

Steel is one of the worlds most essential materials. It is fundamental to every aspect of our lives. From construction, industrial machinery to consumer products, steel finds its way into a wide variety of applications. It is one of the most important products of the modern world and is of strategic importance to any industrial nation. It is also an industry with diverse technologies based on the nature and extent of use of raw materials.

Excess steel capacity was found to be the single phenomenon damaging the interests of the global steel producers during 2014-2017 in terms of lowering the prices and thereby the profitability of the industry. China, having accounted for nearly 50% of the estimated surplus steel capacities, had to assure the outside world that its commitment to bring down the carbon footprint would entail elimination of some of the polluting units in steel, coal and cement. This has provided an interesting opportunity to the steel players across the world, especially India.

India is currently the second largest steel producer after China. Besides, the Government of India has proactively addressed the issues faced by the domestic steel makers and has proactively safeguarded the interest of the industry. There is significant potential for growth given the low per capita steel consumption of 61 Kg in India, as compared to world average of 208 Kg.

Indias crude steel production and consumption (MT)

Production FY14 FY15 FY16 FY17 FY18
Public Sector 16.8 17.2 17.9 18.5 19.8
Private Sector 64.9 71.8 71.9 79.5 82.5
Total 81.7 89.0 89.8 98.0 102.3


Consumption FY14 FY15 FY16 FY17 FY18
74.1 77.0 81.5 84.0 90.7

(Source: Joint Planning Commission)

The Union Cabinet approved the National Steel Policy (NSP) with a long-term vision to give thrust to the domestic steel sector. It seeks to enhance domestic steel consumption, ensure high quality steel production and create a technologically advanced and globally competitive steel industry. Some of the key elements of this policy include:

• Increase consumption of steel across major segments of infrastructure, automobiles and housing, resulting in a potential rise in per capita steel consumption to 160 kg by 2030 from ~61 kg at present

• Achieve 300 MT of steel-making capacity by 2030 through additional investments of Rs.10 lakh crore by 2030-31

• Domestically produce steel for high-end applications-electrical steel (CRGO), special steel and alloys for power equipment, aerospace, defence and nuclear applications

• Reduce reliance on imports to nil and export ~24 MT of steel by 2030

Several Indian companies have undertaken capacity expansions to achieve the targets. Besides, the acquisition of debt-laden steel companies will further reduce time for ramping up existing capacities. With the Governments extension of anti-dumping duty on steel and imposition of quality standards, it is likely that India will be on a fast track growth path in steel production going ahead. Besides, Government programs such as Smart Cities, Skill India, Renewal and revival of road/rail infrastructure projects will further provide a big boost to the steel demand. The demand drivers of the steel segment will also lead to positive developments in the steel pipe sector.

2. Steel tubes and pipes

India is amongst the fastest growing steel tubes and pipe manufacturers globally with production estimated at about 10 million tons a year. Over the years, India has emerged as the global pipe manufacturing hub owing to its best quality offerings at lower cost and geographical advantages. The global accreditations and certifications owned by the Indian companies have further made them preferred suppliers for many leading oil and gas companies in the world and particularly those in the Middle East, North America and Europe.

The steel pipes demand has been increasing on a steady basis owing to requirements from the sectors like water transportation, agriculture, boring, fire-fighting and most importantly infrastructure for oil and gas. It is interesting to note that India is currently under-invested in the pipeline infrastructure with only 1 /3rd of the petroleum products moving through the pipeline which is the most efficient mode of transport for fluids.

The Government has ambitious plans to improve network of oil and gas pipelines across the nation. Recently, tenders for construction of over 12,000 kms of pipelines have been floated by several oil and gas companies for the mammoth expansion plans over the next five years. Besides, rapid industrialisation in the country and real estate demand from affordable housing and ‘Housing for All schemes will lead to increasing investments in building and construction activities. This will necessitate strong requirements of steel tubes and pipes.

River water transportation system is another key area of growth. Several areas in India either suffer from drought or excessive flooding owing to uneven distribution of river water. Around 5 lakh tonnes of large diameter pipes were required for connecting rivers for water transportation in the State of Gujarat alone. The same model is anticipated to be deployed across other states in India, which will necessitate the demand for large diameter pipes. And lastly, but most importantly, is the demand from the rural segment. With thr Governments rural-centric policies in the recent budget, lots of activities in the areas of irrigation and construction will be driving the demand for steel tubes and pipes going ahead.

3. Gas transmission

India at present, has a network of about 13,000 km of natural gas transmission pipelines with a design capacity of around 337 MMSCMD. The natural gas demand has increased significantly owing to its higher availability, development of transmission and distribution infrastructure, the savings from the usage of natural gas in place of alternate fuels, the environment friendly characteristics of natural gas as a fuel and the overall favourable economics of supplying gas at reasonable prices to end consumers. India has six major regional natural gas markets namely Northern, Western, Central, Southern, Eastern and North-Eastern market, out of which the Western and Northern markets currently have the highest consumption due to better pipeline connectivity. However, with the increasing coverage and reach of natural gas infrastructure in India, this regional imbalance is expected to get corrected. Gong ahead, the pipeline network is expected to expand to around 32,000 Kms with a total design capacity of around 815 MMSCMD by 2030, putting in place most of the National Gas Grid that would connect all major demand and supply centre in India.

Planned additions to the pipeline infrastructure

Pipelines Design Capacity (mmscmd) Length (kms)
Existing till 2012 306 12,144
Expected addition in the 12th plan 416 15,928
Expected addition in the 13th plan 60 3,360
Capacity addition MBBVPL/MBPL/Surat Paradip/pipelines beyond 13th plan and till 2030 33 1,295
Total 815 32,727

(Source: ‘Vision 2030, Natural Gas Infrastructure in India, Report by Industry Group For Petroleum & Natural Gas Regulatory Board)

4. City gas distribution

In India, the Petroleum and Natural Gas Regulatory Board (PNGRB) is the regulatory body for City Gas Distribution (CGD), responsible for authorising new areas to set up infrastructure amongst interested players. Indias CGD sector has seen rapid growth in recent years and consumes approx.13.6 MMSCMD of natural gas. There are 15.22 lakh domestic connections, 10,631 commercial customers and 2,974 industrial customers at present in India.The Governments intent to establish a gas-based economy is a good strategic move and hence the CGD segment appears to be positive for its future prospects. To align with the goal of reducing the carbon footprints the Government has set a target of connecting 1 Crore households with PNG by 2019, the introduction of stringent emission levels for vehicles and the proposal to develop green corridors.

Surya Roshni is evenly poised to respond to the industrial opportunities stated above through its best-in-class quality offerings in its steel pipes and strips segment. The Company is geared up to achieve its business goals through adoption of latest technology, achieving operational efficiencies, providing excellent customer services and launching innovative and diversified products and retain its prominent position in the Indian steel pipes Industry.

5. Lighting

The Lighting Industry in India can be broadly categorised into three segments:

• LED Bulbs, LED Street Lights, Down Lighters and Luminaries

• Conventional Lamps such as General Lighting Service (GLS), Fluorescent Tube Lights (FTL), Incandescent Bulbs (ICL) and Compact Fluorescent Lamp (CFL) and others

• Accessories, Components and Control gears (ACCs)

Until a decade ago, Indias lighting segment was traditionally dominated by FTLs and ICLs, largely owing to economical cost, easy availability and effortless installation as against other lighting products. However, these lighting sources were high on energy consumption. The Indian Government identified this drawback and started promoting the energy efficient sources of lighting across the country. This led to the advent of CFLs. Initially they were quite expensive. However, rising demand and high economies of scale led to the fall in prices. With the advancement of technology, superior sources of lighting, such as LEDs flocked the lighting market.

LEDs are solid state semiconductor device which are in existence for over three decades. However, its until a few year ago, it gained popularity in the Indian market. The LEDs are highly beneficial in terms of longer life, higher energy efficiencies, environmental-friendliness and durability. Besides, these lights require a low voltage power supply as compared to the traditional conventional lights. It is reported that 20% of the total electricity produced globally, is consumed by domestic lighting users. The outdated incandescent, halogen and fluorescent lamps are swiftly being replaced with the modern LED lights which will further lead to a reduction in the electricity consumption to the level of 4% from 20%.

The Indian LED lighting market in precedent years has been witnessing tremendous growth in terms of value as well as volume. The Government has been taking continuous efforts to promote LEDs through various schemes. According to a Press Information Bureau (PIB) announcement, by 2019, 770 million LED bulbs and 35 million LED streetlights will be deployed to replace conventional lights. Under the Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJY), around 27.3 million LED bulbs will be distributed to the BPL households.

Currently, the demand for street lighting application, accounts for the major opportunity in the Indian LED lighting market. Over 2.1 million conventional streetlights have already been replaced with LED streetlights across the country, under the Street Lighting National Programme (SLNP). Energy Efficiency Services Limited (EESL), a public energy services company under the administration of the Ministry of Power, Government of India (GoI) is the implementing agency for SLNP. The installation of LED streetlights has resulted in annual energy savings of 295 million kWh, avoided capacity usage of over 73MW and reduced carbon emissions by 230,000 million tonnes annually. The project has been implemented across 23 states and union territories

The other factors which have made this significant impact are the promotions towards increasing LED lights awareness amongst the people as well as the new architectural designs which has boost up the growth of LED Panels and down lighters. According, to The Electric Lamp and Component Manufacturers Association of India (ELCOMA), the LED market in India is expected to grow to Rs.216 billion by 2020.

This leap will result in the LED market accounting for about 60% of Indias total lighting industry (approximately Rs.376 billion) in 2020. Rising consumer awareness about the cost-effectiveness, enhanced life, better efficiency and inherent eco-friendly nature of LED lights will continue to drive volume sales from the industrial, residential and commercial sectors.

Surya Roshni, being the pioneer of technological acceptance in lighting industry, remains committed to offer best quality products and maintain a sustainable leadership in the segment.

6. Consumer durables


India is a tropical country with warm summers lasting for a prolonged period. Hence, fans are a must have for every home. Even though air conditioners and coolers have become a preferred source of maintaining a comfortable temperature, the age old reliable and affordable fans continue to remain in fashion as well. Indias electric fan industry is well-established and has grown significantly over the years. The industry is divided into product types like ceiling fans, table fans, pedestal fans, wall fans and others (industrial, exhaust, multi-utility, tower and bladeless, among others).

Indian fan industry dynamics

Key Particulars Figures
Number of households (2011) ~250 million
Market size ~55 million units
Organised (%) >70%
Organised (units) ~40 million units
Average replacement cycle 10 years
Replacement demand ~90%
Fresh demand ~10%

(Source: Ambit Capital Research)

There are large number of players in both organised and unorganised market, however, much of the growth has been through organised players as consumers move towards branded and more technologically efficient fans. The above exhibit clearly reflects the large proportion of demand coming from the replacement market. It is interesting to note that the large part of this replacement demand will be driven by value-added and premium categories of fans.

Higher disposable incomes, increased availability of continuous power and a faster shift to the organised sector is further propelling the electric fan market in India. A concerted move has been seen towards widening distribution reach and improving rural penetration by the organised segment.


The domestic home appliances market growth in India is driven by the continuous expansion in the middle and affluent class, growing working class population (especially women) and improving lifestyles, growing, young and ambitious working-class population with busy schedules leaving less time for traditional cooking. This is leading to the growing demand for appliances for easy and fast cooking.

Besides that, Indian consumers remained optimistic about their personal finance spending capacities. During the year, the customer confidence was further boosted by controlled inflation and falling cost of consumer credit. Indias consumer disposable income grew by 11% upto Jan 2018 which also aided in a relatively strong demand for consumer appliances. Besides, changing lifestyle towards premiumisation has led to higher growth in premium segment.

According to PWC, the market is expected to witness 10% CAGR till 2022, with the country having the potential to be one of fastest growing markets in the world in terms of consumption, manufacturing and job creation. Factors like emerging middle class, rising disposable incomes and progressive Government reforms such as ‘Digital India will further drive this growth.

Section D: Operational review

1. Steel Pipes and Strips

Key Particulars 2016-17 2017-18
Contribution to total revenues (%) 68 72
Net revenues (Rs. crore) 2,605 3,555
Cash profit (Rs. crore) 100 131
EBITDA (Rs. crore) 176 211
PBT (Rs. crore) 37 64

A) Products

ERW Steel Pipes (GI, Black and Hollow Section)

The Company manufactures ERW Steel pipes in the range of 1/2" to 104" diameter. These pipes find its extensive application across agriculture, industry and construction activities like scaffolding and casing in bore wells.

These pipes are the mediums of transporting water, gas, crude oil and chemicals at varying pressures and densities over long distances. The pipes manufactured by Surya Roshni have the capabilities to meet the challenging requirements of the industry and delivers high standard products of both national and international specifications.

API & Welded Spiral, 3LPE Coated Pipes

The Company maintains its supremacy in the domestic market and is now at par with all the leading global pipe manufacturers in terms of supplying high quality of API line pipes with internal & external coating. Different types of coating like 3LPE, 3LPP, FBE (single & dual layer) and internal epoxy coating are carried to safeguard the pipe from rusting and also increases the life of the pipe. These pipes are produced to meet high standards of specification for both national and international markets, including that of American Petroleum Institute (API). Different other pipes specifications such as EN, BS, AUSTRALIA & ASTRA GRADE are also manufactured by the Company. The API pipes largely find applications across drinking water pipe lines, oil and gas pipelines and plant process water applications. The spiral welded pipes are manufactured in the range of 18" to 105" with maximum thickness of 1 (25.4 mm).

Cold rolled strips and sheets

Cold rolled strips and sheets serve as critical inputs across range of applications in a wide spectrum of industries like auto components, motor stamping, furniture and fittings, domestic appliances, drums and barrels, cycle rims, umbrella tubes and rips and engineering applications. Owing to the sophisticated requirements across these applications, the steel strips possess inherent quality standards, surface finish and close tolerance on dimensions. The Company is fully geared to meet the demanding needs of high value-added segment of CR steel market through its cold rolled plant which was established in 1991 at Bahadurgarh (NCR) and later modernised in the year 2008. The plant serves NCR and adjacent markets of north India, specially focusing on the automotive sector with an installed plant capacity of 1,15,000 MT per annum.

The pipe manufacturing units are located in Haryana, Madhya Pradesh, Gujarat and Andhra Pradesh. All the plants are equipped with state-of-the-art machines, slitting lines, pipe mills, galvanizing units, finishing machines and failsafe, high pressure hydro testing machines. The plant also has sufficient handling facilities. These pipes are sold under the brand ‘Prakash Surya. The ERW & Spiral welded pipes as well as API pipes are exported and well accepted across 50 countries across the globe.

B) Highlights 2017-18

O Increased capacities of the new manufacturing unit for ERW Black and GI Pipes of the Hindupur unit (Andhra Pradesh) to 1,50,000 MTPA from the initial 90,000 MTPA which was during the commencement of the plant in March 2017

• Achieved economies of scale with larger and stronger pipes, fetched good premium, as well as witnessed significant savings in logistic cost from the above plant

• Introduced galvanised pipes (GP pipes) and pregalvanised sheet pipes (PPGI) at the Malanpur, Hindupur and Bhuj facilities

• Introduced infrastructural pipes for solar panel (galvanised structural steel)

• Increased brand visibility and promotional expenses through consistent rise in annual advertising and publicity budget

C) Opportunities and demand drivers City Gas Distribution:

The Government is highly focused on reducing pollution in the cities. Research has found Compressed Natural Gas as the best alternative fuel for vehicles. Hence, the Government has placed City Gas Distribution (CGD) companies on top priority for domestic low-cost natural gas. In order to increase the usage of natural gas in the Indian households from the present of 6.5% to 25% over a decade and to take the Gas Distribution Network across India, PNGRB is coming up with 9th CGD bidding round which is a significant initiative to leapfrog to higher gas usage and address urban population across the country. It also opens new avenues for Oil and Gas sector and provide ample scope of growth for Steel Pipes manufacturing units. The Company will reap benefits from its newly set up 3 LPE Coating Pipe manufacturing unit at Anjar-Kutchh (Gujarat) and tap the unexplored potential.

Interlinking of Rivers:

The Government aims at constructing 30 major canals stretching over around 15,000 kms, including 3,000 small and large reservoirs. The project will also enhance irrigation, control flood damage and increase water supply eventually creating massive business opportunity for the pipes requirement for the segment. Hence, river water distribution system has enormous scope across India and will generate higher demand for larger diameter pipes.

Housing for All: The Central Government has launched a ‘Housing for all scheme to provide houses to the economically weaker sections and provide assistance in building close to 3 crore homes. This will boost the construction industry and generate demand for water and sewage pipes.

Smart Cities: Under this initiative, the Government wants to develop 100 smart cities with better urban infrastructure. This will attract investments for new infrastructure as well as projects seeking to upgrade existing infrastructure, leading to a greater demand for pipes and structures. The

Government has also emphasised the need to have CGD in all Smart Cities, which will further augment the demand for pipes.

Rural India: The Governments rural-centric budget and policies like Food for Work Programme (FWP), Indira Awaas Yojna and Pradhan Mantri Gram Sadak Yojna, will lead to agro-based economic growth and higher consumption of tubes and pipes in this region.

Automobiles: The automotive mission plan envisages the industry to be among the top three in the world in engineering, manufacturing and exporting of vehicles and auto components. This will lead to larger demand for CR strips going ahead. The Companys Bahadurgarh plant is in proximity to several automotive players, which will allow the Company to cater to this demand.

International Events: The ‘Prakash Surya brand is well established across the global markets. The Company will stand to benefit form the major upcoming events like Expo 2020 in Dubai and FIFA 2022 at Qatar.

D) Outlook

On account of the Governments emphasis through the National Steel Policy for increasing the capacity of steel sector, generating solar power, wind power, improving road infrastructure, ‘Housing for All, elevated tracks for railways, city gas projects etc. and increasing infrastructure spending will accelerate the steel pipes business as the requirements of diverse variety of pipes with different needs will grow manifold in near future. The strategic plant locations will provide savings in logistics cost and help the Company in catering the customer demand swiftly. Besides, the Company is geared up through adoption of latest technology, operational efficiency, excellent customer service and launch of innovative and diversified products in the market.

2. Lighting and Consumer Durables

Key Particulars 2016-17 2017-18
Contribution to total revenues (%) 32 28
Net revenues (Rs. crore) 1,282 1,383
EBITDA (Rs. crore) 137 138
Cash profit (Rs. crore) 101 112
PBT (Rs. crore) 81 92



Surya Roshni is amongst Indias second largest manufacturers of lighting products and the most trusted brands for quality in the lighting industry space. Being a pioneer in introducing energy-efficient lighting solutions, Surya Roshni has been providing innovative and safe lighting to its customers. The Company has large domestic presence with a network of over 2,500 dealers and 2.50 lakh Pan India retailers. It also exports to over 40 countries, including the Middle East and U.K (GE, Osram & Tungsrum). Besides, the Company has dedicatedly worked towards technological advancements and developing products that are not only energy efficient but also environment-friendly. Surya LED is amongst the luminaries of the future, driving the transformation in the lighting industry in India.

The Company has completely backward integrated business model through its state-of-the-art plants in Kashipur (Uttarakhand) and Malanpur, near Gwalior (M.P) for manufacturing LED lights (lamps, streetlights and downlighters) and conventional lights (GLS, FTL and CFL), respectively. A Compulsory Registration Scheme (CRS) of Deity/BIS for LED products has been introduced in the industry to keep a check on safety standards of LED products. The Companys manufacturing plants have CRS approval from the Bureau of Energy Efficiency (BIS). It also provided star rating plan for LED lamps which will further enhance the luminous efficacy of lamps.

The product development is being supported by its advanced lighting research and development centre, STIC at Noida. The key focus of the research centre is to develop new LED products further augmenting the Companys product portfolio.

Highlights 2017-18

• Achieved 45% growth in LED lighting which contributes 49% of the total lighting turnover

• Launched premium LED lighting range of LED bulbs, down lighters, battens, lamps, street lights, flood lights and decorative luminaries

• Bagged EESL orders to the tune of Rs.210 crore from EESL for LED bulbs and streetlights

The Companys supply to EESL augurs well for our sustainability, plant utilisation and the resources created for LED production in our Kashipur (Uttarakhand) and Malanpur (Gwalior) plants. For 2018-19, the Company is estimating EESL orders to the tune of Rs.250 crore.

Going ahead, the Company targets to sell 60 million LED Lamps in 2018-19 and achieve a sales target of Rs.900 crore, i.e. approx. 55% of the total lighting turnover. Further, the Company is also strategically planning to increase Suryas market share through low cost products with high quality.

The past two years have witnessed radical changes through de-growth in conventional lighting products, stabilisation in LED prices and fast phasing out of CFL, leading to exponential growth in LED Lighting.

The Companys R&D centre, STIC, is one of the best lighting R&D Centres in Asia that delivers innovation and best-in-class environmental friendly LEDs. The centre is equipped with Mirror Gonio-photometer from LMT-Germany, used for developing new generation energy saving luminaries. In addition, the Company also provides Photometric Optical Testing facility for all kinds of luminaries. Some of the innovative offerings include:

• High-beam angle LED lamps

• Colour changer LED lamps

• New range downlighters and LED battens

• LED Torch with dry cell battery &rechargeable

• Rechargeable lantern

• Solar LEDs

• Spot lights

• LED wall lights

• Smart Motion-sensor LEDs

• Auto-dimming LEDs



Surya Fans has emerged as one of the fastest growing brands in India through its continuous innovation. The Company commenced the fans business in FY2014.Within a short span of 4 years, the Company has achieved No.6 slot in the fan market. It provides wide categories of designer and colourful range of ceiling, table, pedestal and wall mounting fans, along with a wide range of domestic exhaust fans. Over 85% of the Companys products are sold through large chain of dealers and distributors. Balance is consumed in Government institutions (EESL) and public sector units.

Highlights 2017-18

• Achieved sales of Rs.172 crore Suryas SS-32 BLDC super energy-efficient ceiling fan has a uniquely designed motor, which has a structural element with permanent magnets mounted on rotor rings. An electronic controller provides pulses of the current to the stator copper winding that control the speed and torque of the motor. It results in upto 60% savings in power with increased efficiencies, reliability and lower noise levels and better longevity of the fan.

Surya BLDC Fan consumes mere 32 Watt at full speed and saves a substantial 60% power, when compared to 80 Watt that a conventional fan consumes.

• Launched new range of higher premium energy efficient fans range designed with automatic colour changing LED Lights with electroplated finish, aero dynamically designed blades and wood finish aluminium blades

• Offered premium range of fans, such as Plated fans, Kids fans, Under-lite fans, Ventura, Metallica and more than 15 variants of fans with LED All its fans have a premium plated finish, providing an edge to its products

• Launched remote control equipped fans with LED and fans with under light chandelier option, another unique premium offering

• Launched anti-dust fan with that attracts 50% less dust than a regular fan

• Developed a 32W super-efficient BLDC fans, which saves around 60% energy as compared to conventional fans; the fan has the tendency to consume power as per its speed

• Introduced new models of energy efficient and BEE five- star rated fans; this enabled the Company to participate in the Government tenders

Going ahead, the Company is going to capture the strong growth, helping boost its overall fan sales in the coming years. The Company plans to enhance our reach to 50,000 counters with specific focus on new launches planned and with new technologies in the near term.

The Company is fully geared up to increase its share from the present level to capture about 6% of the fan market with its state of-the art offerings by 2020.



The Company introduced the category of home appliances as a new business segment, post its success in the fans. Over the span of three years, the division has offered feature-rich, contemporary range of electrical home appliances like electrical storage water heaters, room heaters, dry irons, steam irons and immersion heater and kitchen appliances like mixer grinder, induction cookers and toasters, among others.

Highlights 2017-18

• Achieved sales of Rs.45 crore

• Introduced several products largely focussing on water heaters product group including the new Qubo & Arctic series of energy efficient and glass line tank water heaters O Introduced new range of room coolers

The Company has been following the strategy of leveraging its vast distribution network and the brand equity of ‘Surya for the growth of its new business segments. The key differentiators of the products offered by the Company are efficiency and modern design. Going ahead, it targets to mark further inroads into fast moving electrical appliances.


Favourable Macro-economic Trends:

With a sustained economic growth coupled with the Governments impetus on improving infrastructure and housing, combined with self-sufficiency of electricity, the electrical space is poised to grow in the coming years.

Government Initiatives:

The Government has been strongly promoting the importance of energy efficient LED lights. It aims to change approximately 40 million street lights to LEDs, along with commercial buildings. The ‘Bijli Har Ghar Yojna (Saubhagya) focuses on electrifying 40 million families across rural and urban areas, which will further necessitate the demand for LEDs. The Unnat Jyoti by Affordable LEDs for All (UJALA) Scheme through EESL is already under execution. Under this scheme, the Government has planned to make LED lamps available at subsidised rates and to distribute close to 770 million such lamps.

Organised Sector Growth:

With implementation of GST, there has been an increasing focus on the reliability of the organised players. The Governments initiatives towards formalisation of economy will play a key role in driving revenues across our lighting, fans and home appliances division. Besides, Compulsory Registration Scheme (CRS) of Deity/BIS for LED products has been introduced in the industry, to keep a check on the safety standards of LED products. This will significantly curb the unorganised sector leading to better demand prospects for the organised sector.

Growing Awareness:

LED lamps have low energy consumption and longer life. With the growing awareness amongst customers, the demand for LED would further grow.

Growing Housing Segment:

With the implementation of RERA and Governments initiative for ‘Housing for All as well as smart cities, the real estate sector is poised for a stronger growth ahead. This will drive demand for energy-efficient LEDs and electrical appliances.


Indias half of its population is under the age of 25. Two-thirds are less than 35. Besides that, India is likely to have the worlds largest workforce by 2027, with a billion people aged between 15 and 64. This would lead to aspirational demand for fans and home appliances going ahead.

Energy Efficiency and Premiumisation:

With rising electricity cost, more and more consumers are opting for energy efficient solutions. Besides, rising income levels are driving the demand for more value-added products across product categories. This is driving the overall trend of premiumisation in most relevant product markets. Energy efficiency is higher in consumers purchase criteria, as the life-cycle costs become more salient

Rural India: The rural India is witnessing a stupendous turnaround with better income of the customers, greater accessibility to the products and availability of electricity with the help of rural electrification. The Company will witness strong growth from this segment with strong demand for high-end/premium fans, which otherwise were dominated by urban markets.


The LED technology will continue to grow and dominate the lighting segment. It will account for increasing share of revenue within the Lighting segment. Low cost and the Governments push for LED lamps will account for a higher share of volume growth in 2017-18. The pricing as well as the introduction of solutions-based products in a competitive market will have a bearing on the growth of the overall lighting market.

The Company has the desired synergies to diversify into consumer durables segment with the launch of high efficiency BLDC fans and other home appliances. The designing of all the products are based on energy efficiency and cost savings. Looking at the increasing benefits of low cost & high efficiency products, consumer demand is increasingly shifting towards these products. Surya has well-trained efficient pool of qualified professionals to handle todays smart consumers, aligned to its brand promise with right delivery in product performance and service. The Company is making every effort to ensure that the customer demands are met seamlessly.

Section E: Value drivers Brand

‘Surya Roshni is one of the most reputed and trusted brand in both domestic and international markets. The ‘Prakash Surya brand holds a prominent position in the Steel Pipes and Strips segment. Whereas ‘Surya brand prominently caters to its lighting and consumer durables segment. With such strong brand equity, the Company is well poised to capitalise on the opportunities unfolding across both the business segment. Moreover, with GST rolling in, there would be more preference towards organised segment. Besides, established brands will also allow the Company to fetch higher premiums on the value-added offerings.

Locational advantage

The strategically located manufacturing facilities play a key role in reaching out to its end customers across all the regions of our country. The Bahadurgarh plant serves NCR and adjacent markets of North India, largely to the autocomponents segment. The Anjar plant, largely caters to the export orders owing to the proximity to ports. The Hindupur plant has proximity to the South Indian markets, savings in logistics cost, improving market share and fetching higher premium on its products besides receiving tax incentives. The Gwalior plant is centrally located, serving UP, MP, Rajasthan and Chhattisgarh markets.


The Company has accredited quality certifications from the leading international agencies and has a long successful track record of scheduled deliveries. Its commitment to deliver world-class solutions to its clients in the shortest time and quick after sales service has enabled it to build robust customer relationships. With ISO9002:2008, ISO14001:2004&OHSAS18001:2007 certifications under its belt, the Company stands tall on its commitment to deliver eco-friendly and quality products.


The Company has already built capacities and is strongly positioned to leverage the industrial opportunities. With no further major capex in site, the benefits derived out of the new business will strengthen the bottom line.


The Company leverages the benefits of a strong and extensive Pan India dealers and retailers network, with more than 2,50,000 retailers. The Company is competitively positioned today over its rivals and has become a prominent brand in the consumer market. Besides, most of the dealers are located across tier II and tier III segments, thus giving the Company an advantage to reach out to the interiors of India, including the rural areas.

Raw materials

The Company procures best quality raw material procure from SAIL, JSW, Hindustan Zinc, Tata Steel and Essar Steel. The Company also imports HR Coils in super EDD grade & higher elongation from Posco, Angang, Sngang and Zaporzhstal, as per the requirement of the prestigious customers.


The Companys management has more than four decades of experience in the Steel Pipe industry and nearly three decades of experience in the Lighting industry.

Section F: Financial review

Financial summary/highlights, operations, state of affairs

(Rs. in Crores)
Particulars 2017-2018 2016-2017
Revenue from Operations 5011.76 4181.03
Other Income 2.66 0.88
Total Revenue 5014.42 4181.91
EBITDA 348.59 313.90
Finance costs 105.16 112.72
Cash Profit 243.43 201.18
Depreciation and amortisation expenses 87.31 83.61
Net Profit Before Tax 156.12 117.57
Tax Expenses 48.08 31.29
Net Profit After Tax 108.04 86.28
Other Comprehensive Income (3.72) (3.34)
Total Comprehensive Income 104.32 82.94

During the year, the Scheme of Amalgamation between Surya Roshni Limited and its associate Surya Global Steel Tubes Limited got sanctioned by the Honble National Company Law Tribunal, Chandigarh Bench (NCLT) and was made effective from 11th January, 2018 by filing of form No INC 28 with MCA and consequently business of SGSTL has been transferred to the Company w.e.f. 1st April 2016 being the appointed date as per the scheme. Accordingly, the aforesaid results have been prepared of the merged entity.

The Company maintained its leadership in the manufacturing of ERW GI Steel Pipes & Strips and continued to be a strong contender in the Lighting industry. In the fiscal year under review: O The gross revenue from the Companys operations registered an increase of 19.86% and was reported at Rs.5,011.76 crore as compared to Rs.4,181.03 crore in the previous year.

• Cash Profits increased 21% to Rs.243.43 crore as compared to Rs.201.18 crore in the previous year.

• Profit before tax increased 32.78% to Rs.156.12 crore as compared to Rs.117.57 crore in the previous year.

• Profit after tax increased 25.22% to Rs.108.04 crore as compared to Rs.86.28 crore in the previous year.

The overall performance is the result of operational excellence, merger of e-SGSTL and rebounding of the performance of Steel Pipe and Strips segment which also improved ROCE and ROE.

Credit Ratings

The Companys credit rating has improved consistently over the past few years and at present has A+ rating for long-term bank facilities. Considering the ample liquidity conditions, thrust of the Government for borrowings from Bond market and the related lower borrowing cost, the company increases its borrowings through Commercial Papers (CP) and obtained rating for enhanced amount of Rs.350 crore from ICRA during the year under review. The CP rating of the company (A1+SO) reflects relatively stronger credit quality and higher degree of safety regarding timely payment of financial obligations.

Section G: Risk management

Like any other business organisation, the Company is exposed to internal as well as external risks, categorised into operational, financial, regulatory etc. The Companys robust Risk Management Policy is adopted to build a strong mitigation network. The key objective of the policy is to ensure sustainable business growth with stability and to promote an upbeat approach towards risk management and mitigation. The key objectives include:

• Identification of the current and future material risk exposures of the Company and ensure they are appropriately mitigated, minimised and managed.

• Protecting brand value through strategic control and operational policies

• Establishing framework for the Companys risk management process and to ensure company-wide implementation

• Ensuring systematic and uniform assessment of risks related to different functions of the Company

• Enabling compliance with appropriate regulations, wherever applicable, through the adoption of best practices.

The Company has laid down a strong foundation for a successful risk management process. The key roles and responsibilities around major business processes are assigned to process owners. The major steps in the Risk framework are

(a) identification of risks under various categories like operational, financial, regulatory, technological and related to human resources

(b) assessment of risks in terms of severity of impact and likelihood of occurrence,

(c) assignment of responsibilities,

(d) development of mitigation plans which create value for business and

(e) monitoring and reporting.

The Board of the Company periodically reviews and evaluates the risk management system of the Company so that the management controls the risks through a properly defined network. The Head of the Departments shall be responsible for implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Board and Audit Committee.

No risks threatening the existence of the organization have been identified. However, there are other risks against which adequate mitigation plans are prepared. Following are some risks and their mitigation measures:

Technology Risk:

The ever-evolving technology with continuous updation may lead to product obsolescence, if not addressed regularly.


The Company makes all efforts in innovating and staying abreast with the best technological knowhow and development of new products. The Company has state-of-the-art R&D facilities in Lighting segment. In Steel business, the experienced team of technical staff takes care of development of products. Regular updation takes place in both businesses to achieve best quality at competitive costing.

Financial Risk:

The policy rates have started showing increasing trend in view of inflationary pressures, which may impact profitability.

Mitigation: As the credit rating of the Company has improved

consistently over the last three years, the impact will be restricted. The Company has always been exploring cheaper financial products like commercial papers, WCDL, Export Packing Credit, Foreign Currency Loan at lower spread (Fully Hedged), to keep the cost of funds to minimum level.

Business Competition Risk:

Both business segments face competition in the market from many established as well as unorganised players.


Excellent brand reputation and launch of innovative and reliable products help the Company to sustain competition from peer companies. Besides, strong distribution network, advertisement and backward integration give a strong competitive advantage. With GST implementation, the threat of unorganised segment is nearly wiped out and the preference for branded products is seen increasing. With manufacturing facility in South already established, the logistics cost will further be reduced.

Operational Risk:

Price fluctuation in HR Coils may lead to loss in value of inventory held. Reduction in prices of LED lamps may lead to loss of inventory valuation.


The inventory levels are monitored continuously by the top management and actions are taken as per the requirement. The Company strikes a balance in keeping adequate inventory so that no business is lost, besides keeping a close watch on movement of steel prices and imports. Similarly, inventory levels are adequately planned for LED considering the market requirements and price movement. The Company also monitors global inter-linkages/dynamics and stress testing ensuring preparedness for unknown eventualities.

Regulatory Risk:

Non-compliance to stringent regulatory and environment norms may result in liabilities and loss of brand reputation.


The Company strictly complies with all statutes applicable to its operations. There are trained staff members entrusted with regulatory responsibilities which are monitored and reported at the highest levels. The Company also uses services of legal and regulatory consultants.

Forex Fluctuation Risk:

The Company deals in exports /imports of products in business and borrowings which are subjected to currency fluctuations.


To counter exposure to foreign exchange volatility, the Company has formulated foreign exchange hedging policy to protect the trading and manufacturing margins by 100% hedging against forex.

Human Resources Risk:

The Company needs adequate talent to run the business. There is a risk labour unrest and maintaining good industrial relations.


The Company has developed and acquired trained manpower to run its operations. The company periodically reviews its senior management team to ensure continuity in leadership. The HR policies ensure to attract and retain the best talents and maintain attrition at low level. The industrial relations are managed through incentivising, training and counselling of labour. The Company Board has also approved ESOP scheme.

Commodity Price Risk:

Company sources several commodities for use as inputs in its businesses and their price fluctuations may lead to losses.


In order to manage the Commodity Price Risk, company has a comprehensive risk assessment framework to manage the risks arising out of the inherent price volatility associated with commodities. This includes robust mechanisms for monitoring market dynamics on an ongoing basis towards making informed sourcing decisions and continuous tracking of positions. Further, the Company has in place a mechanism whereby the Audit Committee of the Board defines risk exposures, measuring them and defining appropriate actions to control the risk.

Section H: Internal control systems

The Company has a proper and adequate system of internal control system commensurate with the size and nature of business. It is an integral component of the Companys corporate governance. The Company has in place a strong and independent Internal Audit Department responsible for assessing and improving the effectiveness of internal control and governance. Internal Audit focuses on operational as well as systems audit. The function is also strengthened by hiring the expert professionals.

To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee. Extensive programme of risk and transaction based internal audits cover all divisions, plants, branches and the different areas of operations.

The Audit Committee of the Board is updated periodically on major internal audit observations, compliances with accounting standards, risk management and control systems. The Audit Committee assesses the adequacy and effectiveness of inputs given by the internal audit and suggests improvement for strengthening the control systems. Further, the Company has an extensive budgetary control system, which is regularly examined by the management. Surya Roshni has well defined Management Information System with clear organizational structures and authorization levels for business transactions.

The Companys internal financial controls are adequate and operate effectively which ensures orderly and efficient conduct of its business, including adherence to its policies, safeguard its assets, prevent and detect frauds & errors, maintain accuracy and completeness of its accounting records and further enable it in the timely preparation of reliable financial information. Surya also undertakes external audit for efficient audit and control for its branches and depots and also for specialized functions like taxation.

Section I: Material developments in human resources/industrial relations

Surya Roshni is committed to create open and transparent HR policies that are focused on people and their capabilities. These policies foster an environment and enable them to deliver superior performance. Attracting quality talent and focusing on their development through training sessions help them improve their performance. The Company also motivates the employees to perform better. Talent recognition and retention has been the top priority.

The Management wishes to place on record the excellent co-operation and contribution made by the employees, collectively called "SURYA PARIVaR" at all levels of the organization. The Companys industrial relations continue to be harmonious during the year under review. The number of personnel directly employed by the company was 3614 as on 31 March, 2018.

Section J: Corporate Social Responsibility

The CSR movement in Surya Roshni is based on the core belief of compliance of social and ecological responsibilities. Corporate social responsibility is basically a continuous ongoing process whereby the Company contributes to the betterment of society and a cleaner and greener environment.

The key objectives of Surya Roshni CSR policy are mentioned in Annexure IV to Boards Report. To attain the Companys Corporate Social Responsibility objectives in a professional and integrated manner, the Company discharged its responsibilities through the Surya Foundation. In pursuance of this objective, the Foundation is working in the areas of Adarsh Gram Yojana, development of preventive and cost- effective health systems of naturopathy and yoga and Ideal Village Projects with emphasis on Literacy and Personality Development of Youth.

During the year under review, the Company on consolidated basis spent Rs.2.04 Crore on corporate social activities, being two percent of the average net profits of the company made during the three immediately preceding financial years.

Cautionary Statement

This report contains forward-looking statements about the business, financial performance, skills and prospects of the Company. Statements about the plans, intentions, expectations, beliefs, estimates, predictions or similar expressions for future are forward-looking statements.

Forward-looking statements should be viewed in the context of many risk issues and events that could cause the actual performance to be different from that contemplated in the Directors Report and Management Discussions and Analysis Report, including, but not limited to, the impact of changes in oil, steel prices worldwide, technological obsolescence and domestic, economic and political conditions. The Company cannot assure that the outcome of these forward-looking statements will be realized. The Company disclaims any duty to update the information given in the aforesaid reports.