TEXMACO RAIL AND ENGINEERING LIMITED
ANNUAL REPORT 2011-2012
MANAGEMENT DISCUSSION AND ANALYSIS
The Company for a greater part of the year faced a challenging time with
forced idle capacity in its Rolling Stock Division with the wagon orders
not materializing as per the projections and pronouncements of the Ministry
of Railways. The Managements production plan indeed went awry waiting
almost endlessly for the release of the orders. Notwithstanding such an
unexpected turn of the situation, the company readjusted its working and
took extraordinary measures to control its costs and overheads and geared
up all its resources for accelerated output concomitant with the release of
the orders in the last quarter of the year.
With a robust current order book and the growing prospects of the Hydro
Mechanical and Steel Casting Divisions, the Company expects appreciable
improvement in the capacity utilization during the current year.
Heavy Engineering Division:
Your Directors have to report that despite trying conditions without
adequate and timely release of wagon orders by Indian Railways, which was
placed only during middle of January 2012 (i.e. after a lapse of almost 16
months), your Company has been able to roll out 3,471 wagons valued approx.
Rs. 674 crore (excluding the cost of Free Issue Materials A/c. Indian
Railways), comprising 2,954 wagons to Indian Railways and 517 wagons to
During the year, the Company booked orders for a total of 5,837 wagons
including private orders. The Indian Railways order on the company during
the year 2011-12 was for 4670 nos, which was the highest ever quantity
ordered by the Indian Railways on any wagon builder. The Company also
secured two prestigious export orders from Bangladesh Railways for 255
wagons valued at Rs. 117.03 crore, and another export order for 70 wagons
valued at Rs. 12.43 crore for supply to Africa. The Company has a healthy
order book of 6,000 wagons, valued approx. Rs.1,299.93 crore (excluding
cost of FIMs A/c. Indian Railways order).
As per the Budget announcement for 2012-13, the Railways have planned the
highest ever planned outlay of Rs. 60,100 crore during 2012-13, with a
freight target of 1025 million tone. The budgeted expenditure for
procurement of rolling stock is about 32% higher at Rs. 18,193 crore as
against Rs. 13,824 crore last year, which is a significant increase. This
will translate in acquisition of higher number of wagons. The Budget has
focused on accelerated development of double-deck container flat wagons,
autocars, and new Design 25T axle load freight cars for which the company
is well positioned to take full advantage.
Your Directors are pleased to inform that the Company has been maintaining
its leadership in the field of BTAP wagons for transportation of Alumina
Powder, and BCCW Wagons for transportation of Cement/Fly Ash. The company
has successfully expanded its customer-base with the addition of
prestigious public and private corporations during the year. The Company
also stands out in meeting the requirement of Bottom Discharge Coal Hopper
Wagon (MGR type) for Mega Power Plants.
Looking to the fast growth of Automobile Industry in the country, the
company expects a substantial demand for auto car wagons. The conceptual
design for Double Deck Auto Rake, developed in collaboration with a
European company, has already been submitted to the Indian Railways and is
expected to be cleared shortly. As for the Container Flat Wagons, the
private Container Operators are continuing to go through a tough time due
to steep hike in haulage charges by Indian Railways. It is hoped that the
Railways will address the issues bearing on the viability of the private
Container fleets to find amicable solution in the near future.
Dedicated Freight Corridors:
The Government of India is actively pursuing and closely monitoring to
ensure steady progress of the construction of the Dedicated Freight
Corridors. Your Company has a special interest in the Western DFC. The
entire Western DFC will be funded substantially by the Japan International
Cooperation Agency (JICA), under the Special Terms of Economic Partnership
(STEP) Scheme of the Government of Japan, with a tied loan of 30% of the
total value of contracts to be sourced from Japan. Your Company is working
closely with the Japanese consortium for indigenous participation.
Joint Venture with UGL Rail Services Ltd., Australia.:
A State-of-the-Art facility, one of the best of its kind, is being set up
by your Company in Joint Venture with UGL Rail, Australia for manufacturing
Locomotive Bogie Frames, Platforms & Cabs, Head Stocks for Coaches and
Wagon components. The progress of the project is satisfactory, and the
commissioning is scheduled in October, 2012, with ramp up to full
production capacity by March next year. The products will be of top
quality, manufactured on world class equipments by a highly skilled
Your Company, along with UGL Rail Services Ltd., further subscribed
Rs.20,25,10,000 each in the Capital of the said Joint Venture, taking up
the total Partners contribution to Rs. 72,02,20,000 in the Capital of the
Joint Venture with Touax Rail, a French Group. The Company has signed a
Joint Venture Agreement on 16th May 2012, with the French Group Touax Rail,
a leading Lease Finance Company of Europe, having vast experience in the
business of leasing out freight cars etc. The JV Company has been named as
Touax Texmaco Railcar Leasing Private Limited, and will be owned and
controlled 50% each by Touax and Texmaco (with Touax holding 2 Shares of
nominal value of Rs. 10/- each in excess of holding of the Company) to
facilitate consolidation of Accounts of the JV Company in their holding
company. To begin with, the JV will have a minimum net worth of Rs.25
crore, the threshold limit for eligibility to qualify for the business,
which would be enhanced in due course. The JV would have an early bird
advantage of the present policy of the Railways of permitting leasing
companies to own and lease wagons to the Industry and other end users on
operating lease basis, which was not permitted hitherto.
Hydro Mechanical Eqpt, Steel Structures & Process Equipment:
After slowdown of activities in the Hydro Power Sector for nearly 4 years,
the enquiries for Hydro-mechanical equipments for various new projects have
started flowing in, while deferred projects have also started reviving
during the latter half of the year. A number of Hydro projects are now in
the pipeline in India and neighboring countries namely Nepal & Bhutan, and
the prospects of Hydro-mechanical Eqpt orders have brightened up.
The Company has secured orders for Hydro-mechanical work in Upper Tamakoshi
Hydro electric project, Nepal (456 MW), valued approx. Rs. 90 crore, Rangit
Stg-IV Hydro electric Project, Sikkim (120 MW) valued approx. Rs. 37 crore,
Farakka Barrage (Replacement/rehabilitation), West Bengal, valued approx.
Rs. 8 crore and recently Rongnichhu Hydroelectric Project, Sikkim (96MW)
for Rs. 46 Crore. There is opportunity for sizable business at Farakka
Barrage where the Govt. of India has decided to replace all the gates in
the 12th five year plan. The Notice Inviting the Tender has been published
in the first week of May 2012 for the second phase comprising of 33 Nos.
Gates, estimated at approx. Rs. 25 Crore.
The execution of current projects had some setbacks due to geological
surprises, natural calamities and local political problems. As a result,
the turnover of the Division stagnated during the year. However, with
improved business prospects, the Division is expected to fare better in the
current financial year.
Besides, the Company has intensified participation in steel bridge and
flyover structure tenders, and has in fact been successful in securing a
couple of orders of Railway Bridges for Kalindee and IRCON.
In the Process Equipment segment, the Company successfully executed the
orders for 3 nos. Direct Contact Air Coolers, 3 nos. Evaporative Coolers
and 6 nos. Adsorber Vessels with internals of molecular sieves, which were
all meant for Air Separation Plants. The overall operations of the Division
were at rather low ebb. However, with the integrated steel plants going in
for modernization, expansion and production of higher grade steel, there is
a good potential for Heavy Pressure Vessels and Buffer Vessels. There are
also fair prospects of orders for Horton Spheres and Storage Vessels
required in the Oil Sector and Chemical Industry.
Steel Foundry Division:
In consequence of delayed wagon orders, the production & despatches of
Steel Castings during the year were just maintained at the same level as
last year, at 17837 Tons and 16951 Tons respectively. In terms of revenue,
however, it has achieved a growth of 15% in its turnover at Rs. 209.37
crore as compared to the last year.
On the export front, however, your Foundry turned out commendable
performance, and its sales has jumped 3-fold compared to the last year with
a turnover of Rs. 19.96 crore backed by a significant order-book of over
Rs. 25 crore at the end of the year. After successful engagement with
Australian, North American & European markets, the focus now is on booming
CIS markets. A MOU has been signed with a CIS based company for development
and supply of Railway castings to their design and the various formalities
are well under way.
Yet another highlight of the Foundry operations was in the area of import
substitution. The Foundry took the lead in development and getting
recognition as an approved indigenous source of supply of Upgraded High
Tensile Centre Buffer Coupler in place of imported AAR approved couplers.
The Division has won acclaim from Indian Railways for this outstanding
achievement in meeting a critical requirement and has been awarded an order
for 1800 sets of Coupler Assembly.
Also noteworthy is the development and supply of Tight Lock Railway Coach
Coupler castings for field trial to a internationally renowned coupler
manufacturer, which are giving excellent performance on Duronto Trains. The
bulk orders are expected to follow.
Besides, the Division has initiated discussions with a major global player
having significant presence in India for development of intricate and hi-
tech castings to be used on heavy trucks and loaders for mining industry.
Upon successful development, the Foundry will have opportunities to supply
castings in this segment across the globe.
Agro Machinery Division:
The performance of the Division substantially depends on the Government
Subsidy Schemes in the States with major markets for Power Tillers such as
West Bengal, Assam, Orissa and Karnataka. The non-release of the subsidy
schemes by the States impacted the performance of the Division.
Furthermore, the import of Diesel Engine for Power Tiller from Siam Kubota
Corporation stood totally suspended from October 2011 till March 2012 due
to devastating flood that gripped Thailand. The Division under the
circumstances, managed to despatch 552 Nos. Power Tillers during the year.
The Division has introduced Power Reaper - harvesting machine in the
market which is well accepted by the farming community. The machine will be
submitted shortly to SRFMTTI, Anantapur (A.P.), for testing to make it
eligible for sale under all Government Assisted Programs. With enhanced
budgetary allocation for Agricultural Machinery in the current financial
year, the Division expects to improve its performance.
Your Directors are delighted to report that based on the Foundrys
consistently good export performance for the last 4 years, the Ministry of
Commerce, Government of India has awarded the prestigious Export House
Status to the Company. The exports of the Company during the year stood at
approx. Rs.74.54 crore including deemed exports. The Company has performed
well in the Australian, American, European, South-East Asian and African
R & D Activities:
The Company is focused on development of new technology for improvement of
its production methodology and reduction of cost by use of alternative
materials etc. During the year the Company has developed a new welding
technique of controlled MIG tack welding which reduces the time and also
improves the weld quality.
After 3D computer simulation of robotic welding of underframes, the Company
has made an investment in a twin-robot welding machine which is currently
being installed for start-up scheduled in 2nd quarter of the year. A
special welding technique of controlled metal transfer was developed for
making root runs with acceptable root bead geometry. This welding technique
is being exploited in structural fabrication with considerable saving in
In Steel Foundry, half-bead welding technique for weld repairs in castings
now takes full advantage of re-crystallization of as-deposited weld metal.
A desk top design and animation of a carousel for dressing of casting
underpinned the benefits of this technology.
Evaluation of the merits of a mechanized shuttle system for wet fluorescent
magnetic particle inspection of side-frame and bolster castings with
synchronized digital image capture of black light images led to the
decision for installing a NDT system in Foundry.
During the year, the Company introduced the latest and most advanced system
of Oracle R12 for its operations. The users of Procurement, Stores, and
Finance functions are progressively attaining higher degree of efficiency
while working with the R12 system. Considering the benefits - in terms of
cost and quality, the Management is in the process of extending the R12
solution for entire Manufacturing operations.
In another significant initiative, the real-time communication network
bandwidth is being extended to cover all the Plants of the Company. The
Management looks forward to significant operational gains from its IT
Your Company has maintained its reputation in the industry as a model
employer for its unique track record of industrial harmony over several
decades. There is a healthy and constructive co-operation between the
workmen and management leading to productivity gains and improvement in
quality, which have become the core strength of the Company.
On 6th September, 2011, your Company entered into a historic Tripartite
Wage Agreement with the Unions for a period of 4 years. In terms thereof,
whereas the Management agreed to grant substantial increase in wages to its
workmen, the Unions in turn assured the Management of their whole hearted
co-operation to raise measurable productivity through effective and
efficient utilization of working hours. The Unions also agreed for Multi-
discipline working (at least 3 trades) by the workmen.
The Company aims to align HR practices with business goals, motivate people
for higher performance and build a competitive working environment. It
launched various training scheme for upgrading the skill and knowledge of
its employees in different operational areas. Various programs & workshops
were conducted during the year, which included Personality Grooming,
Communication Skill, Health & Safety, House Keeping, Energy Management,
Productivity Improvement, Total Quality Management, and Customer
The Companys special program of providing an educational window for B.
Tech 3-year course to its employees in collaboration with BITS, Pilani (at
BITS-Texmaco Centre of Excellence within the premises of the Company) is
yielding excellent results in strengthening the organization.
Your Directors commend the dedication and deep commitment of the workmen,
staff and officers in building the corporate image through sustained
pursuit of excellence.
Employees Stock Option Scheme (ESOS):
Details of Employees Stock Option granted pursuant to Employees Stock
Option Scheme 2007 (ESOS 2007), as also the disclosure in compliance with
Clause 12 of the Securities and Exchange Board of India (Employees Stock
Option Scheme and Employees Stock Purchase Scheme) Guidelines, 1999 are set
out in the Annexure A to this Report. During the year, the Committee of
Directors of the Company at its Meeting held on 9th March, 2012 has
allotted 2,43,500 Equity Shares of the Company to its eligible employees,
pursuant to exercise of 2,43,500 Options by the eligible employees under
ESOS 2007 and consequently the Paid up Share Capital of the Company stands
increased from Rs. 18,17,83,090/- to Rs. 18,20,26,590/- w.e.f 9th March,
2012. Under ESOS 2007, there were 3,65,000 Options outstanding as on
effective date i.e. 1st April, 2010 of demerger of Heavy Engineering and
Steel Foundry businesses of Texmaco Limited to the Company, out of which
employees had exercised 2,43,500 Options and the Scheme thereafter, stands
closed on the balance Options being not exercised and surrendered by
certain eligible employees.
Opportunity & Threats:
It augurs well for the Company that all its business segments are critical
to the economic growth of the country and have been accorded high priority
in the resource allocation by the Planning Commission. The Rail Transport
is recognised as the lifeline of the nation, and there is a massive long-
term plan for the development of the Rail Infrastructure. The Dedicated
Freight Corridor (DFC) Planned by the Government of India is one of the
biggest national projects on the anvil, and the full momentum will gather
with completion of the acquisition of the land in progress and the
finalisation of the multi-lateral and/or bi-lateral international soft
loans. Meanwhile, your Company is re-jigging itself to be in a state of
readiness for successful participation in the bidding process for the new
design, high pay-load freight cars and high powered locomotives to be used
on the DFC.
The renewed emphasis by the Government on the Hydro Power Sector in our
power starved country is very promising. A number of new Hydro Power
projects are getting cleared. There is also a big demand emerging from the
neighbouring countries having rich water resources.
However, in spite of strong positive indicators, there is a serious concern
over delay in implementation of Dedicated Freight Corridor (DFC) and other
high-end Railway Projects. The procrastination in implementation of the
long term procurement policy for wagons is also a perennial problem in
efficient operation and capacity utilization of the Wagon Industry. The
continuing plight of the container freight car operators is also causing
disappointment with an otherwise progressive policy initiative of the
Last but not the least, the current dismal global economic scenario and the
sharp depreciation in the Rupee value are casting long shadows on the
general industry outlook.
Corporate Social Responsibility:
At TEXRAIL, Corporate Social Responsibility (CSR) means continuous
improvement in the quality of life of the workmen/staff associated with the
Company and the people living in its neighbourhood. Education, health care,
hygiene and environment management are areas of priority.
The Company has residential estate inhabiting more than 500 families with
provision of all the amenities e.g. clubs, swimming pool, parks,
playgrounds, gym, air conditioned auditorium, etc. for social, recreational
and educational activities for the benefit of its workmen/staff and
The Company is committed to its mission to serve the poorer sections of the
society through better education and training to promote self employment.
Texmaco Neighbourhood Welfare Society Trust provides financial assistance
to the poor & needy for their health, education, social needs etc.