From The ED’s Desk About Us

Dear Shareholders,

India is now the third largest economy in the world taking into consideration purchasing power parity. With 1.4 billion people and a large young population, it is on course to achieve the much touted “demographic dividend”. As per the World Bank, India is expected to grow by 7.5% for FY 24-25, revising its projections for the same period upwards by 1.2%. This makes it the fastest growing economy in the South Asia region in the coming year.

The India PMI (Purchasing Managers Index) has been hovering around 60 which is well above the global average of 52. All things considered, corporate India has had a good year. The pressure will now fall on the government to enable job creation and sustain this pace of growth.

Overall your company has had a good year. Revenue from operations is up 32% and PBT has increased by 56%. The Transformer division has registered a strong topline growth of 62% over the previous financial year. After almost a decade of flat demand the future of the transformer industry now looks promising in the near future. The planned effort of diversifying our customer base has paid rich dividends. Working capital management has been excellent and this has resulted in significant cash generation for the company. FY 23-24 has been a record year for us achieving the highest order booking, highest dispatches, and highest billing ever realized in this division. While we have seen some improvement in the prices, there is still substantial scope for improvement if demand picks up further. We have recently announced capital expenditure that will increase our capacity and served range significantly. Other players have also announced expansions and the industry must be careful to avoid the issue of overcapacity that has plagued it for so many years. We will further strengthen our design capability and sales force to tackle the needs of the market. All eyes are now on the government to see if they will do enough to support the growing needs of our industry.

The Motor division has seen 5.5% topline growth and 16% volume growth. Year on year we have done well to grow our sales numbers but aggressive pricing by the competition has reduced margins in the short run. Restraint in placing orders by select customers before the elections may have contributed to this. We expect prices to stabilize and improve over the next few quarters. Over the years we have worked hard to plug gaps in our product range. This has resulted in us increasing our manufacturing capacity in our low and medium voltage range. A number of steps have been taken to ensure our capabilities are future ready. We have built vendor capacity and this will enable us to respond quickly to any growth spurt arising from the market. The design optimization project we had undertaken will be completed soon and benefits will accrue in the coming years. Expanding geographical reach and strengthening our channel partners has been ongoing. We have further increased our presence in key growing market segments such as the food and beverage industry, ethanol, chemicals, and pharmaceuticals. The recent spike in copper prices is something we must keep an eye on as the market tends to take its time to incorporate these inflationary events.

The Projects division has shown a robust performance this year growing 160% in terms of topline. We have come a long way in this division increasing our execution capability steadily. Our focus on the semi-government space has paid off receiving some prestigious orders. We have also booked more orders in the GIS (Gas Insulated Switchgear) space further strengthening our position in this segment. Besides GIS, new focus areas for us are green hydrogen, data centers, and renewables. Execution capability has been of a high standard with all projects in the last few years executed on time and within budget. The division has consistently been working with negative working capital and this has resulted in good cash flow generation for the company. This is an extremely good feat and we hope to sustain this in the years to come. We will continue to cherry pick projects that are commercially viable and be selective in our approach. Our hope is to capitalize on a good opening order book in the coming year.

The Drives and Automation division has registered 28% topline growth. We have consolidated our position in the plastics segment and pushed expansion in to areas like printing, metals, machine tools and material handling. E-mobility has been a thrust area for us seeing the successful execution of large prestigious orders. In this regard the division expects to commence local assembly of these drives in line with customers PLI (Production Linked Incentive scheme) requirements. A smooth migration to a new generation of servo drives has been executed seamlessly and this has been a good achievement. Customers have been able to see tangible benefits arising from this upgrade. Our enhanced and modernized plant will ensure adequate capacity and a sustained high standard of quality. The smaller rating range of servo motors we are developing will bolster our solution capability. Imports from a specific country have been eroding market prices and this is a cause for concern. A depreciating rupee is also something that can eat into margins. We are doing our best to mitigate these effects.

Our Magnet Technology Machines division has grown 9% over the previous financial year. In the domestic market severe competition from low-priced imports for a large range of elevator components has been noticed. This has had a negative impact on prices of our gearless machines. There have been some initiatives to push the Government to support domestic manufacturing and the Make in India initiative by policy measures. Our export volumes have also faced the impact of the ongoing war in Ukraine. A strained supply chain and lower demand in some European countries has affected our business. A smaller range of servo motors mentioned above (used by Drives and Automation) is under development and should be ready in the near future. The success of our larger range indigenously developed servo motor has been very encouraging.

The year 2024 is a record breaking year when it comes to global elections. Over 3 billion people in 50 countries will go to the polls (national and regional) this year. Given the background of the elections in various countries, one could even argue that democracy is itself on ballot. At the last World Economic Forum, geopolitical risk has been identified as one of the biggest causes for business uncertainty in the world. Economies are striving to be more self-dependent and protectionism is a theme that is seen playing out. Global trade is “not having the best of times” says director general of the World Trade Organization (WTO), Dr Ngozi Okonjo-Iweala. Global trade would have declined outright but for the increase in export of services.

In India, the surprising election result has ensured that there is no risk of the country sliding towards an autocracy. A recent cover of The Economist magazine stated “A Triumph for Indian Democracy”. A Modi government ensures stability and yet the election result also gives rise to a healthier opposition. Overall inflation is in under control, forex reserves are adequate, the current account deficit is in check, and capacity utilization in the manufacturing sector is in a good spot (approximately 73%). The center’s push for digital governance has had a big positive impact on the rural economy. India tops global digital payments growth today. Global de-risking from China, a young demographic, and a deleveraged banking system have put India in an enviable position. As always we remain positive and hope that the country is able to capitalize on this inflection point.