Techno Electric & Engineering Company Ltd Management Discussions.

Established in 1963, Techno Electric & Engineering Co. Ltd. (TEECL) is one of the leading players in the countrys power infrastructure space. We have a proven expertise across three key segments of the electricity value chain: generation, transmission and distribution. Our businesses span engineering, procurement and construction (EPC); asset ownership; and operations and maintenance.

Stabilising global progress

The global economy grew at par with the momentum of the calendar year 2017 in the first half of 2018 before moderating in the second half. Overall, the GDP is estimated to have grown at 3.6% in 2018, softening from 3.8% in 2017.

The key contributors to this include the US-China geopolitical unrest; tougher credit regime in China; slowdown in the advanced European nations and so on. That said, large emerging Asian economies like India and China continue to drive global growth on account of their increasing share in the overall pie. Growth is further supported by an accommodative monetary policy stance adopted by the US, the UK, the EU and Japan.

Growth is projected to moderate further to 3.3% in 2019, before returning to 3.6% in 2020. In the long term, global economic activity will depend on multilateral efforts to address climate change, repair trade conflicts, boost output and mitigate data security risks.

Source: International Monetary Fund

Growing India momentum

On the domestic front, India is estimated to have grown at 6.8% in 2018-19, being one of the fastest among large economies. Concurrently, the nation rose up 53 places, in the last two years, to assume the 77th rank among 190 countries in the World Banks Ease of Doing Business index. Growth drivers include modest inflation expectations; rapid pace of urbanisation; expanding middle-class; resilient private consumption and high savings propensity; rate cuts by the central banker to ease liquidity; consistent policy-led structural reforms by the Government; sustained investments in infrastructure; and improved credit offtake in the services sector, among others.

Changing world energy scenario

Billions of people are being lifted out of low incomes, enabling economic growth and the demand for energy. The global energy transformation is also being driven by the dual imperatives of limiting climate change and fostering sustainable growth. New technologies are revolutionising the way in which that energy is produced, transported and consumed. And the transition to a lower-carbon energy system is opening up a wide range of business possibilities. An unprecedented decline in renewable energy costs, new opportunities in energy efficiency, digitalisation, smart technologies and electrification solutions are some of the key levers behind the shift.

The share of electricity in final energy use is likely to increase to ~50% by 2050, up from 20% today. There is a rising need for smarter and more flexible electricity grids. To facilitate a match between electricity supply and demand, US$ 13 trillion would be invested in enabling grid infrastructure and power system flexibility, an increase of around US$ 4 trillion [Source: International Renewable Energy Agency (IRENA)]. Further, medium- to long-term growth in power sector depends on conducive regulatory and pricing policies pertaining to tariff regulation, grid connectivity and resilience, and energy storage solutions.

Accelerating uptake of electricity in India

The Indian electricity sector has undergone a paradigm change, jumping to 24th place in World Banks Ease of Getting Electricity index in 2018, as against 111th rank in 2014. This is a quantum leap. New tariff policies and amendments to the Electricity Act, 2003, together with the Governments thrust on round-the-clock power for all and last-mile linkages are some of the contributors in this.

An extensive network of transmission lines has been developed over the years for evacuating power produced by different electricity generating stations and distributing the same to the consumers. India is the worlds third largest producer and fourth largest consumer of electricity. India is also one of the fastest growing sizeable power markets around the world, although per capita consumption at 1,000 kWh remains lower than other comparable countries. Currently, 31% of India is urbanised and urbanisation is expected to touch 60% by 2050.

A recent report from Oxford Economics suggests that 17 of the top 20 fastest growing cities in the world are in India [Source: McKinsey & Co.].

Indias policy environment is increasingly in favour of greater private participation; open access in transmission; phased open access in distribution; mandatory State Electricity Regulatory Commissions (SERCs); licence-free generation and distribution; power trading; smart metering and stringent penalties for theft of electricity. The Government is assisting States through various schemes, such as the Integrated Power Development Scheme (IPDS) to strengthen sub-transmission and distribution networks as well as metering in the urban areas; Deendayal Upadhyaya Gram Jyoti Yojana (DDUGJY) to strengthen the same in the rural areas; the Saubhagya Scheme or Pradhan Mantri Sahaj Bijli Har Ghar Yojana, to provide electricity to all households; and so on. The newly formed Union power ministry has reaffirmed its aim to push the sector onto a trajectory of sound commercial growth and to enable the States and the Centre to move in harmony and coordination.

Renewable Energy Sources (RES) include small hydro project, biomass gasifier, biomass power, urban & industrial waste power, solar and wind energy.

Power supply position during peak hours (as on 28th February, 2019)

Year Demand (in MW) Supply (in MW) Surplus (in MW) %
2014-15 1,48,166 1,41,160 -7,006 -4.7
2015-16 1,53,366 1,48,463 -4,903 -3.2
2016-14 1,59,542 1,56,934 -2,608 -1.6
2017-18 1,64,066 1,60,752 -3,314 -2.0
2018-19 1,77,022 1,75,527 -1,494 -0.8

Source: Central Electrical Authority (CEA)

Conventional power generation (as on 28th February, 2019)

Year Energy generation from conventional sources (in BU) % of growth
2014-15 1,048.673 8.43
2015-16 1,107.822 5.64
2016-14 1,160.141 4.72
2017-18 1,206.306 3.98
2018-19 1,141.988 3.77


The power sector in India is undergoing several shifts. India has moved away from a traditional energy deficit position to an energy surplus position. Fewer long-term Power Purchase Agreements (PPAs) are being signed between distribution companies and independent power producers, with the former increasing their procurement through shorter tenure PPAs or day/week ahead market. Rising share of renewable resources in Indias generation mix signals a transition away from coal-fired power; distributed solar in the form of rooftop and ground mounted modules is expected to grow rapidly.

The passage of the Electricity Act, 2003 promoting competition represented a landmark moment for the Indian power sector, and its effective implementation has attracted and nurtured private participation. Besides the private sector playing an increasing role across the value chain, the Government of Indias push towards 100% household electrification is bringing electricity access to 20 million new households.

India is projected to become a US$ 5 trillion economy in five years and US$ 10 trillion in eight years. Going forward, rapid and meaningful infrastructure development in key sectors such as transport and power will be key to maintaining this pace of progress, as well as reducing the regulatory burden of administrative red tape.

Company review

Financial summary

During the year, our consolidated gross revenue stood at 988.64 crores in 2018-19, as compared with 1,294.36 crores in 2017-18. Our consolidated net profit stood at 193.16 crores in 2018-19, as compared with 204.85 crores in 2017-18.

Risk appraisal

Our risk management policy entails a comprehensive framework that ensures business continuity and growth sustenance, through an effective process of identifying, evaluating and resolving risks and concerns that can undermine its competitive position. The policy helps us make informed decisions, while adhering to the highest level of regulatory compliance, wherever applicable.

Nature of risk Risk details Mitigation measure
Industry risk Slowdown in the industry could impact our business sustainability We are broad basing our business and exploring niche opportunities across geographies to diversify the risk from high dependence on the Indian power market.
Liquidity risk Any delay in receivables could affect our viability We transact with financially robust clients who are in a comfortable liquidity position. Majority of our clients comprise reputed Indian corporates. We work with clients, who have projects that have achieved financial closure. Additionally, we select customers that have been favourably appraised by rating agencies. Besides, we have been consistently cash-positive and prudently employ working capital.
Segment risk Presence in a single business segment may hamper our growth We are widening our segment presence—EPC contracting services and development, operations and maintenance of transmission network—to diversify the risk from excessive dependence on one business segment.
Timebound completion risk Any delay in the completion of project could affect our profitability We have completed more than 375 projects well ahead of delivery schedule. We have a commendable track record and experience with regard to execution and completion of projects undertaken. And we are confident of delivering the same in future as well.
Working capital risk Working capital requirement may increase in an event of delayed payments by clients We choose to pick orders backed by multi-lateral funding; thus, securing ourselves to a great extent.
Price-based competition risk Inability to remain cost- competitive could mean we could lose out on contracts to sectoral peers Our competitive bidding strategy ensures that we are preferred by clients beyond competition.

Human assets

We are fostering a culture of fair management practices and endeavouring to provide a supportive work culture. We consistently invest in our human capital to attract, train and retain high-performing talent. We continually upskill our people, across our core competencies, to remain relevant in a dynamic operating context. Our Board, our strong management team and our people, together comprise an invaluable mix of veteran engineers and experienced technicians with extensive industry insight - the biggest lever in our growth strategy. Our engineering team possesses an average industry experience of over 25 years. We implement cutting-edge technologies to complement our advanced skillsets.

During the year, we invested in ~2,500 training person-hours for our people across various departments. We tied up with reputed Tier-I institutes to organise Management Development Programmes for our employees. We conducted health camps and collaborated with diagnostic centres and super-specialty hospitals for the wellness of our employees and their dependents. Our total employee strength stood at 428, as of 31st March, 2019.

Internal control systems

We have an adequate internal control system, commensurate with the size and nature of business, with regard to purchases of inventory and fixed assets and for sale of goods and services. The system is being upgraded continuously in order to meet and adapt to statutory requirements and changing business conditions.

Cautionary statement

Statements in the management discussion and analysis describing the Companys objectives, projections, estimates and expectations may be forward-looking within the meaning of applicable laws and regulations. Actual results could differ materially from those expressed or implied. Factors that could make a difference to the Companys operations, inter alia, include the economic conditions, government policies and their related/incidental factors.