TD Power Systems Ltd Management Discussions.

“All the meticulous planning and detailing that goes into producing a generator is not something people think of nor should they! We work hard to make sure that people dont have to think about Generators after all thats what we do for a living. In TDPS we make first class generators for the world.”

We continue to grow in India and globally as a leading manufacturer of AC Generators catering to both conventional and renewable fuel based power plants for a diverse range of prime movers with output capacities ranging from 1 MW to 200 MW for steam gasturbine up to 35 MW for hydro and up to 20 MW diesel and gas engines and customized rating for wind turbines. We have honed our design, manufacturing and quality capabilities to meet customer requirements across a spectrum of applications Hydro, Steam, Gas, wind, Geo thermal and special applications.

Some of the special efforts in fiscal 21 demonstrating our design and manufacturing capabilities which have a potential for future opportunities are as follows: Overall acceptance of TDPS generators is growing with the major OEMs and packagers world wide. New developments like Lightweight extreme cold weather application, Geothermal Production Prototype & Mobile application were features of the year while developing a resource for service and replacement generators in South America. Special machines for Lightweight Mobile Application & Industrial Power Generation were supplied during the year which is under testing and acceptance with potential for increased orders.

Continuing our growing recognition & foothold in the Turkish market, we executed breakthrough orders from locally reputed OEMs as well as global companies for steam and Hydro application generators & a challenging order from a global leader based in Israel for Geo thermal application. TDPS emerged as the market leader catering to customers across Biomass, Geothermal and Hydro Applications. 37 machines were supplied during the fiscal in Tukey which is a remarkable achievement in terms of design, manufacturing & quality capabilities. Specifically, the Design, manufacture and successful certification of 7 machines supplied to Global leaders meeting special requirements for outdoor installation in hazardous location containing corrosive gas around the generator was a proud achievement. These generators are designed for harsh outdoor conditions barring entry of corrosive gases into the generator & are fire retardant.

Growing presence in Replacement market with the supply of 2.5MW steam turbine Generator and 7MW Steam Generator replacing Generators earlier supplied by reputed global and Indian suppliers. An order was also executed for replacement of a Generator for Geothermal application In Turkey matching the foot print and output parameters of a machine earlier supplied by an international manufacturer. This is a replacement generator in hazardous area at geothermal power plant. Matching the footprints for the prestigious order which is a replacement and enhancement of VA Tech make 10MW Steam turbine Generator.

Expanding the Global footprint with supply of 1 No - 20MW Steam Turbine Generator for project in West Africa and 2 Nos - 10MW Hydro Turbine Generator in East Africa.

Development and supply of a 9X7.2MW Diesel Generators executed for a largest desalination plant located in UAE. The plant converts seawater to potable water using reverse osmosis technology.

Prestigious order received from Indian Railways (DMW) for the supply of traction motor stator Prototype order.

Strengthened the domestic customer portfolio with the supply of 5 Generators for Hydro and Steam sectors ranging from 0.5MW to 12MW to the power plants located in Nepal and India.

Automation of Rotor stacking & coil making, Varnishing line, Semi automation of Banding process,- Robotic Coil taping machine & motor body painting machine are some of the innovative process automation initiatives that were undertaken to bring about enhanced manufacturing capabilities ushering greater precision, efficiency and quality of Generators;

Manufacturing facilities were partially reopened on April 21 2020 after obtaining necessary approvals from the Government Authorities. With the progressive easing of the lockdown restrictions from May 3 2020 & further permissions and relaxations, almost normal operational levels were achieved from around May 11 2020. The Company however, adopted work from home policy during the entire duration of the lockdown for the Management Staff. Required steps were initiated to restart operations with safety and CoVid related protocol in place including those relating to movement of work men & staff, materials & shipment of finished goods. While the lockdown affected the sales of the company severely in Q1 of fiscal 2021 since almost 6 weeks were lost, sales recovered substantially by the end of first half of 2020 as expected. There were no order cancellations. The impact of Covid led factors on our business was not material since exports contribute to majority of our sales and demand in our international business was intact in fiscal 2021.

We had a spillover of about Rs.3000 lakhs from fiscal 2020 due to the ongoing Covid 19 pandemic & eventual lockdown from March 22 2020. The opening order book for fiscal 2021 was Rs.1,10,691 Lakhs, including Railways business of Rs.71,507 Lakhs and Turkey business of Rs.8,567 Lakhs. Domestic order book stood at 34% and Export including deemed exports orders stood at 66% of the order book excluding traction business. Steam, Hydro & Diesel contributed 44%, 37% & 10% of the order book respectively excluding traction business. The share of exports and deemed exports stood at 66% of the order book excluding traction business.

During fiscal 2021 the total orders inflows was Rs.53,880 lakhs including Rs.6,853 lakhs at Turkey. Domestic order inflows stood at 38%, while export including deemed exports orders stood at 62% of the order inflow. Steam, Hydro, Diesel & Gas segments contributed to about 46%, 24%, 8% & 13% of manufacturing revenues in fiscal 2021.

While top 10 customers contributed 86% of consolidated revenues in fiscal 2021 (77% in fiscal 2020), we continue to add new customers in our mainstay applications- Steam (Italy, France and Switzerland), Hydro (India, Austria & Germany) & Diesel (Germany). We have also added a global OEM as our customer in Spain for gas engine application. Following our successful empanelment for Defense application we have also added a new customer from Singapore for supply of generator to the Defence forces in India. Indian Railways is one of the new customers with a significant potential for sustained orders in the forthcoming years.

In our quest to have our Generators enlisted widely, we continue to undergo audits by OEMs for supply to Defense, nuclear, wind and Diesel applications.

As of March 31, 2021 (fiscal 2021) 4,882 generators have been supplied to over 95 countries. Majority of the Installations are in Asia (including Eurasia) & Middle East (3875) followed by Europe (493), Africa (205) Americas (204), & Oceania (105). The representative country wise installations for each of the continents as follows indicates our global footprint:

Asia & Middle East- India (2965), Nepal (96) Japan (72), China (45) Korea (29), Thailand (120), Indonesia (114), Philippines (48) and Russia (from Eurasia) (83), Iraq (27).

Africa- South Africa (27), Nigeria (36), Kenya (40), Uganda (19)

Europe-Turkey (115), Germany (73), Norway (72), Italy (32), Austria (30) , Netherlands (29), Belgium (23), United Kingdom (28), France ( 12)

Americas- United States (111), Canada (18), Columbia (14)

Oceania- Australia (95)

Our Generators installed in the above locations cater to different applications, specifications, geographical and climatic challenges which proves our design, manufacturing and quality capabilities over the years.

STANDALONE BASIS

The manufacturing revenue was Rs. 48,539 lakhs in fiscal 2021 as compared to Rs.45,506 lakhs in fiscal 2020, an increase of 7%. Exports and deemed exports contributed 58% of manufacturing revenues and domestic revenues contributed 42 % in fiscal 2021. Steam and Hydro contributed 72% of manufacturing revenues as compared to 78% in fiscal 2020. Steam contributed 41% & Hydro contributed 31% of manufacturing revenue in fiscal 2021 as compared to 49% & 29% respectively in fiscal 2020. Thus, steam and hydro continue to be our mainstay segments & is indicative of the global trends while there is a gradual transition to other applications like diesel, gas, wind & geo thermal applications. The traction business contributed Rs.6,013 lakhs to the revenues in fiscal 2021 compared to Rs.4,400 lakhs in fiscal 2020. In this business, our customer reduced the forecast by about Rs.3500 lakhs in fiscal 2020 representing about 3 months production as compared to the original projections due to production delays at their plant owing to the lockdown. However, they resumed production at peak production rate from November 2021 which led to full volume from thereon. This business promises to be Rs.10,000 lakhs topline segment for us in fiscal 2022.

The project business revenue was Rs.2,027 lakhs in fiscal 2021 as compared to Rs.3,162 lakhs in fiscal 2020.

The total income including exceptional items for fiscal 2021 was Rs.51,154 lakhs as compared to Rs.49,625 lakhs for fiscal 2020. The profit after tax and other comprehensive income is Rs.1,794 lakhs in fiscal 2021 as compared to Rs.1,690 lakhs in fiscal 2020.

The interest coverage ratio at 15.95 times in fiscal 2021 as compared to 11.59 times in fiscal 2020 reflected a change of 25% or more. This ratio is based on working capital borrowings since the company has no long term debt.

CONSOLIDATED BASIS

The manufacturing revenues are higher by 18.14% at Rs 57,095.82 lakhs in fiscal 2021 as compared to Rs.48,327 Lakhs in fiscal 2020. The Project business revenues decreased by 28.45% to Rs.2, 262.61 Lakhs in fiscal 2021 from Rs.3,162.34 Lakhs in fiscal 2020 owing to sluggishness in the sector & the ongoing pandemic conditions.

The total income including exceptional item is Rs.61,008 lakhs in fiscal 2021 as compared to Rs.54,213 lakhs in fiscal 2020. The profit after tax including comprehensive & exceptional income is Rs.4,366 lakhs in fiscal 2021 as compared to Rs.2,885 lakhs in fiscal 2020. During fiscal 2021, a write back of Rs.718 lakhs was affected in the Indian subsidiary (DFPS) in respect of dues to overseas supplies.

The following ratios reflected a change of 25% or more: Operating profit margin-12.68% in fiscal 2021 as compared to 9.01% in fiscal 2020 due to higher sales revenue, cost reduction and profits in overseas subsidiaries.

Net Profit Margin- 7.62% in fiscal 2021 to 5.81% in fiscal 2020.

Return on Net worth- 9.60% in fiscal 2021 as compared to 7.04 % in fiscal 2020 due to higher sales revenue, operating profit margins post tax profit on Standalone and Consolidated basis.

The interest coverage ratio at 24.47 times in fiscal 2021 as compared to 12.25 times in fiscal 2020 reflected a change of 25% or more.

The Turkey and Europe subsidiaries performed well in fiscal 2021. The performance of the overseas subsidiaries is stated in the Directors Report.

Outlook

The strong order inflow continues in this fiscal 2022. The pending order book as on 01st April 2021 is Rs.1,09,522 Lakhs (Rs.1,02,359 lakhs for India and Rs.7,163 lakhs for Turkey), including traction business of Rs.68,574 lakhs. The share of exports and deemed exports is 64% of order book excluding traction business.

The demand from the overseas markets which remains strong along with the significant uptick of order booking and sales in the domestic segment will drive sales volumes in fiscal 22. In the overseas market, huge increase in orders in the gas engine segment as well as steam turbines coupled with improvement in the hydro market is expected to contribute to a big uptick in the executable orders in fiscal 2022. In existing traction business, our customer has returned to peak production leading to full volume & this business promises to be Rs.10,000 lakhs top line segment for us in this fiscal 2022.

On the back of a strong order book we now expect our manufacturing sales to be in the region of Rs 65,000 lakhs to Rs 66,000 lakhs.

Owing to the strong order inflows in fiscal 2022, we are now reaching the stage where majority of the fresh order booking will go to fiscal 2023. We have strong order inflows from all segments of the business including exports which is a good sign that we will grow our generator sales from the level projected this fiscal 2022. There is growing demand in the domestic market from cement, steel, sugar, co-generation, distilleries, waste heat recovery and garbage burning plants and the long awaited revival of the capex cycle is gaining momentum.

The relationship with our new engine customer in Germany is moving surely and steadily forward with increased inflow of orders. This business remains on track to deliver the expected volumes in the next one to two years.

In fiscal 2022, TDPS Turkey is expected to post revenues of about 9 Million Euros. Unfortunately, the new incentive scheme announced by the Government of Turkey is likely to impact fresh investments in Turkey since it will make local manufacturing unattractive for power producers. However, we are seeing possibilities new orders from this market being diverted to TDPS India. While TDPS does not lose overall the next year outlook for TDPS Turkey looks not so positive. Depending on how the market in Turkey develops, we will initiate necessary actions to downsize the operations when we have to and minimise costs.

Fiscal 2022 is witnessing unprecedented rise in prices of steel and copper. This price rise is expected to have an impact on Raw Material costs & a dampener on the profits of the company. We have engaged in negotiations with our long-term customers both in India and outside with an objective to preserve the long-term relationship with our customers, not lose market share and ultimately pass on the full cost increases to the market. In this process, we took the hard decision to absorb some cost increases in a few cases, and share the cost increases in many cases. From the last quarter of this fiscal 2022, full price increases that have been finalized with the customers will be effective and will see the full pass through of these price increases next fiscal. For this fiscal, the impact is estimated in the region of Rs 2,400 lakhs which will bring down the gross contribution by 3-4%. As mentioned earlier this is a short term effect and we are taking all steps to return to the normal gross margin profile in the next fiscal. This hard decision was imperative to preserve the long term customer relationships with major cost sharing with the Indian OEM customers and to a lesser extent with international customers.

Despite this, barring unforeseen events including arising due to the ongoing Covid pandemic, we expect to have the same level of profits as last year on a consolidated basis because of the significant increase in the top line. Our push for cost reductions is ongoing which is expected to yield benefits in fiscal 2022 too. While we are well placed to capitalize on any upswing in domestic demand as well as overseas markets, exports will continue to be our focus area in fiscal 2022. We also continue to focus on building our existing portfolio of generators for other applications. We are confident of achieving sustainable growth, considering the strong demand in the domestic market, growing overseas orders, our diversified portfolio of applications and world class manufacturing facility. With the strong order inflow and the overall market scenario in the beginning of the year, it seemed that fiscal 2022 was on the track to be an exceptional year. However, due to the impact of unprecdented increase in price of raw materials, that growth may be impacted but we hope to achieve double digit growth including our Turkey business.

The Company continues to remain debt free and maintains a healthy cash position.

While we grow our generator business across a spectrum applications and globally, our efforts to foray into new products in the electric rotating machines has yielded results. We have secured an order for large synchronous motors for about Rs 1800 lakhs for execution in fiscal 2023. The market for this product is currently estimated to be about Rs.20,000 lakhs per annum of which we hope to get a decent share.

The above trends are very positive and point to a healthy the sales growth for fiscal 2023. The railway business with Indian Railways is on track. The first prototype units will be in the next two months leading to business in the second half of next year after which this business is expected to grow substantially. While the railway business with our existing customer is at full yearly volume we are awaiting expansion of the current order quantity as well as new segments where we have bid with them. This business will also grow substantially over the years.

Risk Management and Mitigation

The Companys business relates to manufacture and sale of generators falling under capital goods sector and is dependent on national & global economic growth, investment climate and business confidence as well as the sectors in which the Companys products are used.

Our significant overseas presence helps us to weather the vagaries in the domestic market & we are well placed to capitalize on any upswing in domestic demand as a leading manufacturer of Generators in India. Our focus on exports and ongoing association with leading global leaders are the drivers imparting sustainability & growth for the companys operations. This will also help the Company in mitigating risk arising out of dependence on either domestic or overseas markets.

Some of the major risks being faced by the Company are described herein below:

Economic slowdown and market concentration

A conducive investment climate and interest rate regime, global economic and market conditions drive growth and performance of the industrial sector which forms the Companys customer base. An economic slowdown directly impacts the demand for capital goods, including the products of the Company.

Further, over dependence on any market/s may adversely affect the performance of the Company, if the concerned market is faced with factors stated above. The Company continues to focus on marketing its products in the global markets and has collected top notch references which has enabled it to gain a firm foothold in the overseas markets. In fact, we are gradually moving towards a dominant player in certain verticals in the overseas market. We have consistently grown our export base, by adding new OEMs within & increased market share in existing verticals through better pricing, customization etc. and diversifying into introducing new product verticals. The company continues to direct significant resources establishing a global footprint to mitigate the risk of over dependence on certain countries/regions. On the back of such initiatives, the contribution of exports to the total turnover has significantly grown and provided sustainability to our revenues. Manufacture & supply of generators in Turkey catering to the Turkey market requirements which promises to be a significant market for the Company is a noteworthy step in this direction. Increasing acceptance and ordering by European customers on our Europe subsidiary reflects the success of our overseas marketing foray.

Technology and Product concentration

Steam turbine generators continue to be a major contributor of our standalone net sales year on year. Advanced technology relating to steam turbine generators or the development of steam turbine generators that prove superior in quality or effectiveness to our generator could affect our dominant market position in this segment. However, our R&D & design capabilities support technological & design upgrades to meet customer specifications & requirements.

Even though Steam generators accounted for a significant portion of the revenues, the contribution of hydro, gas and other applications is consistently growing de risking the products mix. The continuing efforts to diversify offerings in product verticals catering to horizontal hydro generators, vertical hydro generators, diesel engine generators, wind turbine generators, gas engine generators, gas turbine generators, high voltage motors and generators for Geo thermal and Solar thermal applications enables market presence across the spectrum of generator market in India and overseas reducing dependence on any particular industry or market segment.

Technology Risk

Response to and adoption of advanced technology and emerging power generation industry standards and practices on a cost-effective and timely basis is critical to sustaining and growing market reach of the Company.

The Company operates in the engineered-to-order capital goods industry where product efficiency, critical product features and overall life cycle costs play an important role.

The company designs generators on the basis of customer requirements/specifications. The Companys team is engaged continuously in design and development of generators meeting customer requirements from time to time. It is an ongoing activity of the design group to develop generators for special applications.

Technology absorption continues and orders are being received for generators with special applications and varied specifications. As a part of the technology agreements, the Company receives updation of technology and processes continuously from licensors.

Competition Risk

Given the significant exposure to overseas OEMS, the Company faces competition from large corporations in Europe, America and in South East. These large corporations have access and derive significant benefit of advanced technologies, greater global reach, and larger financial resources enabling them to sell products at prices lower than the Companys, which may have an adverse effect on the Companys market share and results of operations. This may compel the Company to quote aggressively impacting its margins.

With a view to mitigate this risk, the Company continues to provide value proposition to customer with products which meet the benchmark efficiencies at a competitive price and shorter delivery time. The Company continues to upgrade its engineers to order platform and design capabilities by incorporating latest technologies in its products and improvements in the design of generators enabling it to offer more efficient machines. Reduction in production, distribution costs and improvement in operating efficiencies are continuously pursued enabling it to offer competitive prices. The Company prioritizes its supply chain in sourcing good quality raw materials and other inputs at competitive prices with high reliability in meeting delivery timelines.

Risk arising from transnational sale of products

In view of export of product to several countries in various continents, there is a risk of various types of claims from customers towards under performance of product and third party claims if the laws of that country are not fully conformed to.

The Company has strict quality control procedures which ensure that all the products supplied to the customers must meet the contractual parameters. It is ensured that the contracts with customers clearly specify the obligations of the Company. In addition, the Company takes appropriate contractually insurance policies to cover all such risks.

Manufacturing facilities, Design and Development

We have 2 manufacturing units, both located at Bangalore equipped with advanced automation/ machines which help in delivering quality products at competitive prices. One of the facilities is a dedicated large generator manufacturing unit with state-of-the-art machines and equipment. Both the manufacturing units are ISO 9001:2015 compliant. We invest in upgradations, modernization and automation of processes and design on an ongoing basis to ensure that our facilities are state of the art in generator manufacture.

The Companys R&D facility which is approved by the Department of Scientific Industrial Research, GOI focuses on adoption of new technology and development of superior designs enhancing performance, quality and reducing cost. The Companys team is engaged continuously in design and development of generators meeting customer requirements from time to time. Projects to develop generators for Special application design modification and enhancement are ongoing. Our generators are approved by reputed and leading engineering consultants.

Internal Control Systems and their adequacy

The Company has established adequate internal control system, commensurate with the nature of its business and size of its operations in order to ensure quality and reliability of underlying processes focused towards achieving operational efficiency, supported by Management reviews. All audit observations and follow up actions thereon are initiated for resolution by the finance function and Reported to the Audit Committee. Attention is also drawn to the statement on internal financial control in the Directors Report.

Environment, Health and Safety

The Companys environmental, occupational health and safety management systems fulfill ISO 14001-2015 and ISO 45001-2018 for OH&S Management system. As a leading Generator Manufacturer, the Company conducts all its operations in a manner that is protective of the environment, health and safety of employees, customers, suppliers and the community in large and is a zero-discharge facility. In fulfilling this commitment, we maintain and continually improve all our process and complying with legal and other requirements, in order to

a. Ensure safety and Health of our employees, associated stakeholders and focus on how to make the world a better place to live.

b. Comply with all applicable legal Safety and Health performance of individuals at different levels while considering their career advancement in the organization.

c. Enhance Safety, Health and Environment (SHE) awareness amongst employees and associated stakeholders through effective communication and training.

d. Ensure SHE responsibility amongst all the employees in their practices, promote and value their involvement in achieving the goals of this policy.

e. Fix responsibility of SHE policy and procedures on the contractors, Sub-Contractors, Transporters and all other agencies operating with the Company.

f. Integrate Health & Safety in all decision-making processes of the company including those dealings with purchase of plant equipment, machinery & materials as well as selection and placement of personnel.

Adopt all the relevant techniques & methods such as risk assessment and safety audits at appropriate intervals of time to assess the status on Quality, Environment and Health & Safety and take relevant remedial measures to overcome problems encountered.

Human Resources

Continuous skill development and enhancement is important for the Company with its focus on quality & export markets. The Company is committed to training, skilling and up skilling its work force on an ongoing basis which ensures that its work force is able to adopt evolving technologies, processes and techniques. The Companys leadership engages affirmatively in employee development and engagement activities such as involvement in the Corporate Responsibility initiatives, active participation of work force in safety initiatives, quality improvement programs, language skills, leadership development programs, training programs and training under license agreements, on an ongoing basis. During the year, about 53-man hours per employee was dedicated for training. Employee relations continue to remain peaceful and cordial. As on March 31, 2021, the total strength of employees, including permanent, contract basis and trainees stood at 1,141.

The Company believes in equal opportunity in recruitment and in the course of the employment among employees regardless of color, race, gender, social origin, caste or religion. Efforts are continuously made to create an inclusive working environment for women and to integrate them in organizational functions.

In a new initiative of recruiting women employees for the first time in the manufacturing unit, 10 women employees were recruited during August 2019 & provided technical training. They are currently deployed in the Stator Coil Insulation section used in manufacturing a product for the Railways.

The Company firmly believes that every woman employee of the Company has a right to work in an environment free from sexual harassment, intimidation or offensive behavior and in which issues of harassment will be resolved without fear of reprisal. In this direction a Policy on prevention/prohibition of sexual harassment of woman at Companys workplace (“Policy”) is in place to take effective measures to avoid and eliminate and if necessary to impose punishment for any sexual harassment in the Companys work place integrated with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company continues to reinforce the Code of Business Conduct across functions/workforce. In order to enhance communications and to create a congenial environment, the organizational leadership and the shop floor employees of the company have invested significant amount of time and effort.

Financial Review

Consolidated basis

The results of operations for the year ended March 31, 2021 and 2020 on a consolidated basis is as follows:

Particulars Fiscal 2021 Fiscal 2020
(Rs. in Lakhs) % of Total Income (Rs. in Lakhs) % of Total Income
Income:
Sales 59,358.43 98.45% 51,489.34 97.50%
Other Income 932.25 1.55% 1,318.76 2.50%
Total Income 60,290.68 100.00% 52,808.10 100.00%
Expenditure:
Consumption of Raw Material, Stores,
Spare parts and Components 38,587.15 64.00% 34,219.52 64.80%
Purchases for Project Business 1,002.01 1.66% 1,717.82 3.25%
Operating and Other Expenses 13,174.40 21.85% 12,231.29 23.16%
Interest and Finance Charges 446.54 0.74% 545.19 1.03%
Depreciation Amortization of
Technical Knowhow 2,149.76 3.57% 2,222.66 4.21%
Total Expenditure 55,359.86 91.82% 50,936.48 96.46%
Profit Before Tax & Exceptional item 4,930.82 - 1,871.62 -
Exceptional item 717.51 - 1,405.24 -
Profit Before Tax 5,648.33 - 3,276.86 -
Provision for Taxation 1,150.51 - 796.68 -
Deferred Tax (22.62) - (513.57) -
Profit/(Loss) After Tax 4,520.44 - 2,993.75 -
Other Comprehensive Income
Exchange difference on translation
of foreign operations (255.78) - (19.41) -
Re-measurement of defined benefit plans 136.13 - (119.44) -
Deferred tax on the above (34.26) - 30.07 -
Total (153.91) - (108.78) -
Total Comprehensive Income 4,366.53 - 2,884.97 -

Fiscal 2021 compared to Fiscal 2020

INCOME

Total income increased by Rs.7,482.58 Lakhs, or 14.17%, to Rs.60,290.68 Lakhs in fiscal 2021 from Rs.52,808.10 Lakhs in fiscal 2020, primarily due to increase in sales volume of Manufacturing Business.

NET SALES

Net sales increased by Rs.7,869.09 Lakhs, or 15.28%, to Rs.59,358.43 Lakhs in fiscal 2021 from Rs.51,489.34 Lakhs in fiscal 2020, primarily due to increased sales volume of Manufacturing Business.

Net sales from our manufacturing business increased by Rs.8,768.82 Lakhs or 18.14%, to Rs.57,095.82 Lakhs in fiscal 2021 from Rs.48,327 Lakhs in fiscal 2020. Net sales of our Manufacturing Business contributed 94.70% and 91.51% of our Total Income in fiscal 2021 and 2020 respectively.

Net sales from our Project Business decreased by Rs.899.73 Lakhs or 28.45%, to Rs.2,262.61 Lakhs in fiscal 2021 from Rs.3,162.34 Lakhs in fiscal 2020. Net sales of our Project Business contributed 3.75% and 5.99% of our Total Income in fiscal 2021 and 2020 respectively.

Expressed as a percentage of total income, net sales increased to 98.45% in fiscal 2021 from 97.50% in fiscal 2020.

OTHER INCOME

Other income contributed 1.55% and 2.50% of our total income in fiscal 2021 and 2020, respectively.

Other income decreased by Rs.386.51 Lakhs or 29.31%, to Rs.932.25 Lakhs in fiscal 2021 from Rs.1,318.76 Lakhs in fiscal 2020, mainly due to other income in fiscal 2020 included foreign exchange gain of Rs. 405.95 lakhs which was not the case in fiscal 2021.

EXPENDITURE

Total expenditure increased by Rs.4,423.38 Lakhs or 8.68%, to Rs.55,359.86 Lakhs in fiscal 2021 from Rs.50,936.48 Lakhs in fiscal 2020.

CONSUMPTION OF RAW MATERIAL, STORES, SPARE PARTS AND COMPONENTS

Consumption of raw material, stores, spare parts and components expenses increased by Rs.4,367.63 Lakhs or 12.76% to Rs.38,587.15 Lakhs in fiscal 2021 from Rs.34,219.52 Lakhs in fiscal 2020, primarily due to increase in the volume of manufacturing product. Expressed as a percentage of total income, raw material consumption was at 64.00% in fiscal 2021 compared to 64.80% in fiscal 2020.

PURCHASES FOR PROJECT BUSINESS

Our purchases for Project Business including Japan Subsidiary decreased by Rs.715.81 Lakhs, or 41.67%, to Rs.1,002.01 Lakhs in fiscal 2021 from Rs.1,717.82 Lakhs in fiscal 2020 due to lower sales volumes. Expressed as a percentage of total income, purchase for project business contributes 1.66% in fiscal 2021 from 3.25% in fiscal 2020.

OPERATING AND OTHER EXPENSES

Our operating and other expenses increased by Rs.943.11 Lakhs or 7.71%, to Rs.13,174.40 Lakhs in fiscal 2021 from Rs.12,231.29 Lakhs in fiscal 2020.

Power & fuel expenses decreased by Rs.6.56 Lakhs, or 0.91% to Rs. 711.99 Lakhs in fiscal 2021 from Rs. 718.55 Lakhs in fiscal 2020.

Personnel expenses through salaries, wages and bonuses increased by Rs.458.69 Lakhs or 8.05%, to Rs.6,159.01 Lakhs in fiscal 2021 from Rs.5,700.32 Lakhs in fiscal 2020 due to additional recruitment and ex-gratia payments and increase in salary of workmen.

Welfare expenses increased by Rs.56.27 Lakhs or 5.23%, to Rs.1,132.29 Lakhs in fiscal 2021 from Rs.1,076.02 Lakhs in fiscal 2020.

Rent charges increased by Rs.16.80 Lakhs, or 20.77%, to Rs. 97.69 Lakhs in fiscal 2021 from Rs. 80.89 Lakhs in fiscal 2020.

Selling expenses increased by Rs.140.14 Lakhs, or 12.08%, to Rs.1,300.50 Lakhs in fiscal 2021 from Rs.1,160.36 Lakhs in fiscal 2020 due to increased sales.

Insurance expenses increased by Rs.29.66 Lakhs or 43.53%, to Rs.97.80 Lakhs in fiscal 2021 from Rs.68.14 Lakhs in fiscal 2020.

Travelling expenses decreased by Rs.351.22 Lakhs, or 34.50%, to Rs. 666.72 Lakhs in fiscal 2021 from 1,017.94 Lakhs in fiscal 2020 on account of restricted travelling due to COVID.

Postage & Telephone charges decreased by Rs.14.97 Lakhs, or 21.82%, to Rs. 53.64 Lakhs in fiscal 2021 from Rs.68.61 Lakhs in fiscal 2020.

Consultancy and Professional charges decreased by Rs.45.28 Lakhs or 11.30%, to Rs.355.54 Lakhs in fiscal 2021 from Rs.400.72 Lakhs in fiscal 2020.

Contribution to Corporate Social Responsibility increased by Rs.12.10 Lakhs, or 75.63%, to Rs. 28.10 Lakhs in fiscal 2021 from Rs. 16 Lakhs in fiscal 2020 due to increased profits.

Bank charges increased by Rs.48.81 Lakhs, or 11.15% to Rs.487.52 Lakhs in fiscal 2021 from Rs.438.71 Lakhs in fiscal 2020 due to higher utilization of non-fund limits.

Royalty charges decreased by Rs.7.27 Lakhs, or 52.19 %, to Rs 6.66 Lakhs in fiscal 2021 from Rs 13.93 Lakhs in fiscal 2020 due to decreased in sale of product under license agreement.

Direction charges including other expenses increased by Rs.129.53 Lakhs, or 45.51%, to Rs.414.12 Lakhs in fiscal 2021 from Rs.284.59 Lakhs in fiscal 2020.

Rates and taxes increased by Rs. 85.35 Lakhs, or 97.89 % to Rs. 172.54 Lakhs in fiscal 2021 from Rs.87.19 Lakhs in fiscal 2020 due to tax payment in Turkey subsidiary.

Software expenses increased by Rs.76.09 Lakhs, or 57.49% to Rs.208.44 Lakhs in fiscal 2021 from Rs.132.35 Lakhs in fiscal 2020 on account of new license.

Expressed as a percentage of total income, operating and other expenses is 21.85% in fiscal 2021 when compared to 23.16% in fiscal 2020.

The Company has made Provision for doubtful debts of Rs.115.17 Lakhs, on account of debtors which are doubtful.

INTEREST AND FINANCE CHARGES

Our interest and finance charges decreased by Rs.98.65 Lakhs, or 18.09%, to Rs.446.54 Lakhs in fiscal 2021 from Rs.545.19 Lakhs in fiscal 2020, due to reduced interest cost on account of borrowings in FCNR.

DEPRECIATION AND AMORTIZATION OF TECHNICAL KNOW-HOW

Our depreciation and amortization of technical know-how expense decreased by Rs.72.90 Lakhs or 3.28%, to Rs.2,149.76 Lakhs in fiscal 2021 from Rs.2,222.66 Lakhs in fiscal 2020.

PROFIT BEFORE TAX AND EXCEPTIONAL ITEM

Profit before tax and exceptional item increased by Rs.3,059.20 Lakhs or 163.45%, to Rs.4,930.82 Lakhs in fiscal 2021 from Rs.1,871.62 Lakhs in fiscal 2020.

EXCEPTIONAL ITEM

Exception item of Rs.717.51 lakhs was on account of write back of payable in Indian Subsidiary compared to Rs.1,405.24 Lakhs in fiscal 2020 which included Rs.1,189.30 lakhs of write back of payable in India Subsidiary and Rs.215.94 lakhs on account of profit on sale of land.

PROFIT BEFORE TAX

Profit before tax increased by Rs.2,371.47 Lakhs or 72.37%, to Rs.5,648.33 Lakhs in fiscal 2021 from Rs.3,276.86 Lakhs in fiscal 2020.

TAXATION

Our tax expense increased by Rs.844.78 Lakhs, or 298.39%, to Rs.1,127.89 Lakhs in fiscal 2021 from Rs.283.11 Lakhs in fiscal 2020 due higher profit.

PROFIT AFTER TAX

Consequently, our profit after tax increased by Rs.1,526.69 Lakhs, to Rs.4,520.44 Lakhs in fiscal 2021 from Rs.2,993.75 Lakhs in fiscal 2020.

The consolidated net worth stands at Rs.47,067.64 Lakhs increase of Rs.4,567.34 Lakhs over fiscal 2020.

Stand-alone basis

The results of operations for the year ended March 31, 2021 and 2020 on a standalone basis is as follows:

Particulars Fiscal 2021 Fiscal 2020
(Rs. in Lakhs) % of Total Income (Rs. in Lakhs) % of Total Income
Income:
Sales 49,941.43 97.52% 47,894.20 96.93%
Other Income 1,268.52 2.48% 1,515.09 3.07%
Total Income 51,209.93 100.00% 49,409.29 100.00%
Expenditure:
Consumption of Raw Material, Stores,
Spare parts and Components 33,649.25 65.71% 32,165.50 65.10%
Purchases for Project Business 778.32 1.52% 1,717.82 3.48%
Operating and Other Expenses 11,888.09 23.21% 11,138.72 22.54%
Interest and Finance Charges 445.85 0.87% 545.00 1.10%
Depreciation and Amortization
of Technical Knowhow 2,096.83 4.08% 2,199.77 4.45%
Total Expenditure 48,858.34 95.41% 47,766.79 96.98%
Profit Before Tax and Exceptional Items 2,351.59 - 1,642.50 -
Exceptional Items - - 215.94 -
Profit Before Tax 2,351.59 - 1,858.44 -
Provision for Taxation 626.46 - 728.15 -
Deferred Tax (22.62) - (513.57) -
Profit/(Loss) After Tax 1,747.75 - 1,643.86 -
Other Comprehensive Income - - - -
Exchange difference on translation of foreign operations (55.77) - 135.66 -
Re-measurement of defined benefit plan 136.13 - (119.44) -
Deferred tax on the above (34.26) - 30.07 -
Total 46.10 - 46.29 -
Total Comprehensive Income 1,793.85 - 1,690.15 -

Fiscal 2021 compared to Fiscal 2020

INCOME

Total income increased by Rs.1,800.64 Lakhs, or 3.64%, to Rs.51,209.93 Lakhs in fiscal 2021 from Rs.49,409.29 Lakhs in fiscal 2020, primarily due to increase in sales volume of Manufacturing Business.

NET SALES

Net sales increased by Rs.2,047.23 Lakhs, or 4.27%, to Rs.49,941.43 Lakhs in fiscal 2021 from Rs.47,894.20 Lakhs in fiscal 2020, primarily due to increase in sales volume of Manufacturing Business.

Net sales from our manufacturing business increased by Rs.3,182.43 Lakhs, or 7.11%, to Rs.47,914.29 Lakhs in fiscal 2021 from Rs.44,731.86 Lakhs in fiscal 2020. Net sales of our manufacturing business contributed 93.56% and 90.53% of our Total Income in fiscal 2021 and 2020, respectively.

Net sales from our Project Business decreased by Rs.1,135.20 Lakhs, or 35.90%, to Rs.2,027.14 Lakhs in fiscal 2021 from Rs.3,162.34 Lakhs in fiscal 2020. Net sales of our Project Business contributed 3.96% and 6.40% of our total Income in fiscal 2021 and 2020, respectively.

Expressed as a percentage of total income, net sales contributes 97.52% in fiscal 2021 versus 96.93% in fiscal 2020.

OTHER INCOME

Other income contributed 2.48% and 3.07% of our total income in fiscal 2021 and 2020, respectively.

Other income decreased by Rs.246.59 Lakhs, or 16.28%, to Rs.1,268.50 Lakhs in fiscal 2021 from Rs.1,515.09 Lakhs in fiscal 2020 mainly due to other income in fiscal 2020 included foreign exchange gain of Rs.589.99 lakhs compared to Rs.373.00 lakhs in fiscal 2021.

EXPENDITURE

Total expenditure increased by Rs.1,091.55 Lakhs, or 2.29%, to Rs.48,858.34 Lakhs in fiscal 2021 from Rs.47,766.79 Lakhs in fiscal 2020.

CONSUMPTION OF RAW MATERIAL, STORES, SPARES PART AND COMPONENTS

Consumption of raw material, stores, spare parts and components expenses increased by Rs.1,483.75 Lakhs, or 4.61% to Rs.33,649.25 Lakhs in fiscal 2021 from Rs.32,165.50 Lakhs in fiscal 2020, primarily due to increase in the volume of manufacturing product. Expressed as a percentage of total income, a raw material consumed expense contributes to 65.71 % in fiscal 2021 from 65.10% in fiscal 2020.

PURCHASES FOR PROJECT BUSINESS

Our purchases for Project Business decreased by Rs.939.50 Lakhs, or 54.69%, to Rs.778.32 Lakhs in fiscal 2021 from Rs.1,717.82 Lakhs in fiscal 2020, due to lower sales volumes. Expressed as a percentage of total income, purchases for Project Business contributes to 1.52% in fiscal 2021 from 3.48% in fiscal 2020.

OPERATING AND OTHER EXPENSES

Our operating and other expenses increased by Rs.749.39 Lakhs, or 6.73%, to Rs.11,888.09 Lakhs in fiscal 2021 from Rs.11,138.70 Lakhs in fiscal 2020. Expressed as a percentage of total income, operating and other expenses is 23.21% in fiscal 2021 when compared to 22.54% in fiscal 2020.

Personnel expenses through salaries, wages and bonuses increased by Rs.432.66 Lakhs, or 8.32%, to Rs.5,629.80 Lakhs in fiscal 2021 from Rs.5,197.14 Lakhs in fiscal 2020 due to additional recruits and ex-gratia payment and increase in salary of workmen.

Rent charges increased by Rs.5.14 Lakhs, or 12.78%, to Rs.35.07 Lakhs in fiscal 2021 from Rs.40.21 Lakhs in fiscal 2020.

Selling expenses increased by Rs.234.53 Lakhs, or 22.08%, to Rs.1,296.91 Lakhs in fiscal 2021 from Rs.1,062.38 Lakhs in fiscal 2020.

Insurance expenses increased by Rs.23.64 Lakhs, or 53.27%, to Rs.68.02 Lakhs in fiscal 2021 from Rs.44.38 Lakhs in fiscal 2020.

Travelling expenses decreased by Rs.325.57 Lakhs, or 34.06%, to Rs.630.30 Lakhs in fiscal 2021 from Rs.955.87 Lakhs in fiscal 2020 on account of restricted travelling due to COVID.

Postage & Telephone charges decreased by Rs.17.33 Lakhs, or 29.61%, to Rs.41.19 Lakhs in fiscal 2021 from Rs.58.52 Lakhs in fiscal 2020.

Consultancy & Professional charges decreased by Rs.49.46 Lakhs, or 15.98%, to Rs.259.97 Lakhs in fiscal 2021 from Rs.309.43 Lakhs in fiscal 2020.

Contribution to Corporate Social Responsibility increased by Rs.12.10 Lakhs, or 75.63%, to Rs.28.10 Lakhs in fiscal 2021 from Rs.16 Lakhs in fiscal 2020 due to increased profits.

Bank charges increased by Rs.55.93 Lakhs, or 14.66% to Rs.437.50 Lakhs in fiscal 2021 from Rs.381.57 Lakhs in fiscal 2020 due to higher utilization of non-fund limits.

Royalty charges decreased by Rs.7.27 Lakhs, or 52.19%, to Rs.6.66 Lakhs in fiscal 2021 from Rs.13.93 Lakhs in fiscal 2020 due to lower sale of product under license agreement.

Direction charges including other expenses increased by Rs.129.53 Lakhs, or 45.90%, to Rs.411.72 Lakhs in fiscal 2021 from Rs.282.19 Lakhs in fiscal 2020.

Manufacturing expenses increased by Rs.32.85 Lakhs, or 32.77%, to Rs.133.10 Lakhs in fiscal 2021 from Rs.100.25 Lakhs in fiscal 2020.

Software expenses increased by Rs.76.09 Lakhs, or 57.49%, to Rs.208.44 Lakhs in fiscal 2021 from Rs.132.35 Lakhs in fiscal 2020 on account of new license for design and engineering software and upgradation ERP.

Rates and taxes increased by Rs.17.44 Lakhs, or 28.79 %, to Rs.78.01 Lakhs in fiscal 2021 from Rs.60.57 Lakhs in fiscal 2020.

The Company has made Provision for doubtful debts of Rs.115.17 Lakhs, on account of certain debtors which are doubtful.

INTEREST AND FINANCE CHARGES

Our interest and finance charges decreased by Rs.99.15 Lakhs, or 18.19 %, to Rs.445.85 Lakhs in fiscal 2021 from Rs.545.00 Lakhs in fiscal 2020, due to reduced interest cost on account of borrowings in FCNR.

DEPRECIATION AND AMORTIZATION OF TECHNICAL KNOW-HOW

Our depreciation and amortization of technical know-how expense decreased by Rs.102.94 Lakhs, or 4.68%, to Rs.2,096.83 Lakhs in fiscal 2021 from Rs.2,199.76 Lakhs in fiscal 2020.

PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS

Profit before tax and exceptional items increased by Rs.709.09 Lakhs, or 43.17%, to Rs.2,351.59 Lakhs in fiscal 2021 from Rs.1,642.50Lakhs in fiscal 2020.

EXCEPTIONAL ITEM

There is no exceptional income in fiscal 2021 whereas in fiscal 2020, a profit on sale of land which resulted in a profit of Rs Rs.215.94 Lakhs was reported under exceptional item.

PROFIT BEFORE TAX

Profit before tax increased by Rs.493.15 Lakhs, or 26.54 %, to Rs.2,351.59 Lakhs in fiscal 2021 from Rs.1,858.44 Lakhs in fiscal 2020.

TAXATION

Our tax expense including deferred tax increased by Rs.389.26 Lakhs, or 181.41 %, to Rs.603.84 Lakhs in fiscal 2021 from Rs.214.58 Lakhs in fiscal 2020 due higher profit.

PROFIT AFTER TAX

Our profit after tax increased by Rs.103.89 Lakhs to Rs.1,747.75 Lakhs in fiscal 2021 from Rs.1,643.86 Lakhs in fiscal 2020.

FORWARD-LOOKING STATEMENT

Statements in the Management Discussion and Analysis describing the Companys plans, estimates and projections may be forward looking statements within the meaning of applicable securities laws and regulations. Actual results may materially differ from those expressed or implied in the report. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events.

For and on behalf of Board of Directors
Mohib N Khericha Nikhil Kumar
Chairman Managing Director
Ahmedabad Bangalore
M N Varalakshmi N Srivatsa
Chief Financial Officer Company Secretary
12th August 2021 Bangalore Bangalore