Transformers & Rectifiers India Ltd Management Discussions.


The International Monetary Fund (IMF) has pared Indias Growth forecast for last fiscal and the next two years, citing softer recent growth and weaker global outlook, but sees the economy making a recovery and also retaining its place as fastest growing major economy.

Global growth is forecast to slow down to 3.3% in 2019 from 3.6% in 2018 with a downside risk due to trade tensions and chaotic Brexit.

According to IMF estimate, Indias economy grew 7.1% in FY 19 and is expected to recover to 7.3% in current fiscal and further accelerate to 7.5% in FY 21. It has uniformly cut 0.2 percentage points for all the three years from its earlier assessment.

Could India end current fiscal a $3 trillion economyर: According to IMFs October 2018 data, FY20 GDP is seen at $ 2.958 trillion. However, Indias own assessment sees GDP at र: 210 trillion, which at exchange rate of र: 70 per $, translates into $ 3 trillion.

After a stunning, pan India mandate, the new governments big job is to recharge a slowing economy, It will have to undertake structural reforms to reverse the slowdown in economic growth, strengthen the banking sector, boost household savings and offer tax cuts.

India may continue to be the fastest growing major economy in the World, but it confronts serious headwinds with growth slowing, demand waning, private investment still missing and the global economy facing uncertainty.

The new government needs to address the key challenges:

1. Getting economy moving again

2. Addressing Financial Sector troubles

3. Getting private investment flowing

4. Creating 8 million jobs per year

5. Addressing weakness in exports

6. Raising Public investment without compromising fiscal prudence

7. Addressing rural stress due to low growth and soft prices.

Besides these, there are several Sectoral agenda to address:

Taxation, Oil/Gas/Coal, Telecom, Skills, Corporate affairs, Commerce and Industry, Startups, Roads/ Highways/Shipping, Labour, Banking and Finance, Agriculture, Railways, Rural developments etc.

It is to be seen if the new government will bite the bullet and will launch the long overdue, painful reforms such as Labour Reforms, Corporate Tax, Selling off Air India & Other non-strategic PSUs, Open up multi brand Retail & E-commerce, Land Laws, GST rate structure, Bank mergers/ Capitalisation & clean up etc.


The Interim Budget 2019-20 was overall unremarkable and did not see any major announcements for the power Sector, However, with higher allocation made for the governments Integrated Power Development Scheme (IPDS), the equipment industry received a leg-up.

Further, the interim budget laid emphasis on the importance of electric vehicle (EVs) and energy storage solutions. Another announcement was the provision of electricity connections to every willing household under the Saubhagya Scheme by the end of March, 2019.

Also, the focus on creating a fully digital economy with one lakh digital villages in the next five years, is laudable.

At the time of writing this report, the FY 20 Budget has just been announced. As such, more detailed study is needed. However, FY 20 budget seems to be an enhancement over the Interim Budget.


Total installed capacity in the beginning of 2018-19 Q3 reached 344GW will State, Central and Private Sectors commanding 24%, 30% and 46% respectively. Significant contribution of 21% came from non-conventional sources of energy viz. solar, wind, biomass etc.

During this period, the peak demand was around 175GW. Even then the deficit was around (0.8)%. However, it is encouraging to note that in the last few years; the deficit has gradually come down from -12.7% to (0.8)%. With increasing demand for power, electrical equipment industry also witnessed growth. During April18 to September18, if grew 19%. But this was not due to growth across the board; primarily good growth was witnessed by meters (42.5%), Cables (37.1%), Distribution Transformers (26.2%) and to lesser degrees by capacitors (12.8%), L V Switchgear (14.2%), MV Switchgear (9.4%). Insulators witnessed -24.7% Contraction. Power Transformer growth was limited to only 2.6%. Over the last 5 years, the Export CAGR has been 12% whereas the Import CAGR is about 3%.

(र: in Crore)

Period Exports Imports
2014-15 35,420 55,988
2015-16 38,580 53,986
2016-17 39,280 55,291
2017-18 41,677 55,608
2018-19 48,366 Est. 66,552


Hits and Misses

The Scheme was launched in November 2015. It covers 27 states and 5 union territories. There are 4 key parameters:

1. AT&C (Aggregate Technical and Commercial Losses).

2. ACS (Average Cost of Supply)

3. ARR (Average Revenue Realised) gap there of

4. Book losses & Power purchase Costs.


1. AT&C Losses: In the past 3 years it has reduced from 20.74% to 18.72 %. 8 States have achieved less than 15% AT & C Losses

2. ACS-ARR gap: It has come down from र: 0.59 per Kwh to र: 0.28 per unit. 7 States have, however, achieved a negative gap or a revenue surplus.

3. Book Losses: These have reduced by more than 71% from र: 514.8 billion in 2015-16 to र: 150.49 billion. Nine States have reported profits in fiscal 2018.

4. Power purchase Costs: PPCs have stayed flat in the past 3 years, around र: 4.19 per unit to र: 4.20 per unit.


UDAY has been one of the best attempts to clean up the Distribution segment. Its deadline has been March, 2019. It is likely that UDAY II will be launched in continuation of the efforts to further improve Discom health.


There are several issues impacting the business and the performance. Some of these issues are externally controlled, and therefore, will have to be factored in the overall business plan. But there are also several issues and challenges which are purely internally controlled. Quick response to these issues is vital to good performance. This calls for a dynamic and agile Organisation Structure, which can be proactively action oriented. Some of the Key issues are:

1. Competitive and manufacturing-friendly designs

2. Ongoing value-engineering and re-engineering efforts.

3. Optimal manufacturing cycle time

4. Avoiding Test bed congestion

5. Completeness of dispatches

6. Competitive purchase prices and optimal credit terms

7. Contract audit and vetting

8. Design audit and vetting etc.

Running a transformer business successfully is not a mean job. But then, for any business, we cannot expect the sky to be blue all the time. We have to navigate through rough weather, and therefore, we need to focus on organizational priorities to deal with issues confronting us.


Comparison of various items between financial statements for fiscal year 2018-19 and fiscal 2017-18

(र: in Lakhs)

Standalone Consolidated
Particulars FY2019 FY 2018 FY2019 FY 2018
र: % र: % र: % र: %
Net Sales 80727.27 95.76% 66608.81 95.14% 82768.33 95.68% 69230.64 94.90%
Contract Revenue - - 75.01 0.11% - - 433.93 0.59%
Service Income 1369.29 1.62% 1072.62 1.53% 1462.31 1.69% 1074.22 1.48%
Other Operating Income 1185.41 1.41% 1553.48 2.22% 1313.81 1.52% 1632.04 2.24%
Other Income 1023.06 1.21% 698.26 1.00% 964.89 1.12% 579.21 0.79%
Total Income 84305.03 100.00% 70008.18 100.00% 86509.34 100.00% 72950.04 100.00%
Raw Material 65672.87 77.90% 52680.76 75.25% 65613.29 75.85% 53129.10 72.83%
Excise Duty - - 815.57 1.16% - - 800.91 1.10%
Employee Cost 2981.77 3.54% 3023.34 4.32% 3240.02 3.75% 3301.55 4.53%
Other Expenses 8672.24 10.29% 6986.45 9.98% 10341.83 11.95% 8589.94 11.78%
Total Expenses 77326.88 91.72% 63506.12 90.71% 79195.14 91.55% 65821.5 90.23%
EBIDTA 6978.15 8.28% 6502.06 9.29% 7314.20 8.45% 7128.54 9.77%
Finance Charge 4489.50 5.33% 4344.60 6.21% 4597.21 5.31% 4443.53 6.09%
Depreciation 1696.77 2.01% 1470.05 2.10% 1852.44 2.14% 1611.40 2.21%
Profit Before Taxes
& Exceptional 791.88 0.94% 687.41 0.98% 864.55 1.00% 1073.61 1.47%
Exceptional Item - - - - - - - -
Share in Profit/ Loss of Associates - - - - - - (17.11) (0.02%)
Profit Before Tax 791.88 0.94% 687.41 0.98% 864.55 1.00% 1056.50 1.45%
Taxation 296.76 0.35% 251.01 0.36% 354.59 0.41% 432.95 0.59%
PAT 495.12 0.59% 436.40 0.62% 509.96 0.59% 623.55 0.85%
Comprehensive 19.89 0.02% (0.46) (0.00%) 21.23 0.02% 0.78 0.00%
Comprehensive 515.01 0.61% 435.94 0.62% 531.19 0.61% 624.33 0.86%
Income for the year
Profit attributable to Owners of Company - - - - 472.16 0.54% 539.53 0.76%
Non-Controlling Interest - - - - 59.03 0.07% 84.80 0.12%


Total income of the Company has increased to र: 84,305.03 Lakhs in financial year 2018-19 from र: 70,008.18 in financial year 2017-18. Total Profit before tax for the financial year 2018-19 is र: 791.88 Lakhs as against the total profit before tax of र: 687.41 Lakhs for the previous financial year 2017-18. Profit after tax for financial year 2018-19 stood at र: 495.12 Lakhs compared to Profit after tax र: 436.40 Lakhs during financial year 2017-18.


Total income of the Company has increased to र: 86,509.34 Lakhs in financial year 2018-19 from र: 72,950.04 Lakhs in financial year 2017-18. Total Profit before tax for the financial year 2018-19 is र: 864.55 Lakhs as against the total Profit before tax of र: 1,056.50 Lakhs for the previous financial year 2017-18. Profit after tax for financial year 2018-19 stood at र: 509.96 Lakhs compared to Profit after tax र: 623.55 Lakhs during financial year 2017-18.


This section of the Annual Report has been included in adherence to the spirit enunciated in the Code of Corporate Governance approved by the Securities and Exchange Board of India. Shareholders and Readers are cautioned that in the case of data and information external to the Company, though the same are based on sources believed to be reliable, no representation is made on its accuracy or comprehensiveness. Further, though utmost care has been taken to ensure that the opinions expressed by the management herein contain its perceptions on most of the important trends having a material impact on the Companys operations, no representation is made that the following presents an exhaustive coverage on and of all issues related to the same. The opinions expressed by the management may contain certain forward-looking statements in the current scenario, which is extremely dynamic, and increasingly fraught with risk and uncertainties. Actual results, performances, achievements or sequence of events may be materially different from the views expressed herein. Readers are hence cautioned not to place undue reliance on these statements, and are advised to conduct their own investigation and analysis of the information contained or referred to in this section before taking any action with regard to their own specific objectives. Further, the discussion following herein reflects the perceptions on major issues as on date and the opinions expressed here are subject to change without notice. The Company undertakes no obligation to publicly update or revise any of the opinions or forward-looking statements expressed in this report, consequent to new information, future events, or otherwise.