Investor Presentation
MAY – 2015
2
Company at a Glance 1
2
4
Contents
Long term Growth Opportunity remains intact
inspite of Short Term Concerns 3
Strong Business Fundamentals
6 Risk and Concerns
Business Overview & Company Data 5
Robust Financials to Support Growth
Company at a Glance
4
Focused player in Transformer Industry with 52 years experience
Leading manufacturer of customized transformers for industrial, building and power applications:
—Oil Filled - Power and Distribution Transformers
—Dry type - Resin Impregnated and Cast Resin Dry Type Transformers
Enjoying about 15% market share in Industrial application transformers
Large Installation base of more than 56,000 transformers throughout India
State-of-the-art manufacturing facility for Oil filled Power Transformers at Makarpura in Vadodara with a built up area of 10,000 square meters
Created grass route manufacturing facility by relocating the existing operations of manufacturing of oil filled Distribution Transformers and Dry Type Transformers at Village Vadadala, Taluka Savli, Dist. Vadodara with built up area of 16300 square meters which had increased the installed capacity by 4,000 MVA (Total 13,000 MVA p.a.)
Experienced and professional management team with an average industry experience of more than 30 years.
Focus on Quality: Received ISO 9001 accredition from KPMG, USA, way back in 1998, well established Quality assurance systems and procedures and ISO 9001:2000 from ISOQAR for Quality Management System in the year 2007
Revenue Mix (FY’15)
Power
Transformers
39%
Dry
Transformers
19% Distribution
Transformers
42 %
Strong Business
Fundamentals
6
Continuous focus on improvements in technology and systems
Developed technologically superior products
Extensive use of advanced technology leading to reduction in process time, cost optimization and product quality improvement — Use of latest static mixture technology- based and computer controlled casting plant
Research & Development focus on safer and environment friendly Dry type transformers. License agreements with German companies:
Computerized designs based on internally developed software — Validated by type testing at independent Government laboratories like CPRI, ERDA, etc.
— For Cast Resin Transformer design software provided by HTT, Germany
Extensive training provided in technical and management fields with special emphasis on Total Quality Management
Products of the company enjoy ISO 9001:2000 status for design, manufacture and after sales services
MORA Transformatoren for Vacuum Resin Impregnated Transformers and coil winding technology
HOCHSPANNUNGSTECHNIK UND TRANSFORMATORBAU (HTT) for Cast Resin Transformers
7
De-risked business model
Trusted vendors to leading business houses across industries, well known PSUs and large co-operatives
Marquee client base includes GETCO, BPCL, Grasim, KSEB, Reliance Industries, Reliance Energy, Jindal Steel, Nirma, Infosys Technologies and EPC contractors like ABB, Siemens, BHEL, Larsen & Toubro, Schneider, Alstom, etc.
Long term client relationships result in
high repeat business
Top 10 clients - (in terms of revenue contribution of last year)
GUJARAT ENERGY TRANSMISSION CORPORATION LTD.
SIEMENS LTD.
BHARAT PETROLEUM CORPORATION LTD.
LARSEN AND TOUBRO LTD.
SUZLON POWER INFRASTRUCTURE LTD.
ABB INDIA LTD.
STERLING AND WILSON LTD.
RELIANCE INDUSTRIES LTD.
KERALA STATE ELECTRICITY BOARD
BHARAT HEAVY ELECTRICALS LTD.
De-risked business
With aggressive marketing and new client acquisitions, the company is constantly trying to reduce client concentration.
Top 10 client contribution has been at 29% in FY14 and 34% during FY15.
Top 10 Client Contribution
Marquee clients in high growth industries
38% 39%
46%
36%
27%31% 29%
34%
0%
10%
20%
30%
40%
50%
60%
FY'08 FY'09 FY'10 FY'11 FY'12 FY13 FY14 FY15
8
Industry-wise Revenue split (FY15)
Well diversified revenue streams
Power Projects22%
SEB16%
Utilities8%
O & G & Petroleum6%
Building4%
Steel, Metal & Minerals
4%
Chemical & Petrochem.
3%
Infrastructure3%
Cement2%
Consumer Prod.2%
Others30%
9
…and strong marketing and servicing capabilities
Well established nationwide network of 13
offices
More than 65 marketing professionals and 20
service executives in all major industrial cities
and Metros located throughout the country
Marketing office locations:
― Vadodara
― Delhi
― Mumbai
― Chennai
― Kolkata
― Bangalore
― Pune
― Chandigarh
― Secunderabad
― Coimbatore
― Ahmedabad
― Nagpur
― Jamshedpur
Strong marketing set up generates client satisfaction
Long term Growth
Opportunity remains
intact inspite of Short
Term Concerns
11
Projected investments in major industries remains weak
Source: Industry Reports
Telecom
Cement
Steel
IT
Automobile
India’s Telecom market has slowed down due to regulatory uncertainity and high inflation.
Telecom revenues are expected to grow at a CAGR of 7% to reach Rs 1.6 tn by FY17E
Cumulative capex of ~US$25 bn (~Rs 1.5 tn) expected in FY14-17E led by data network
(largely 3G) as 2G related investments have peaked out.
Consumption to grow at a CAGR of 7% over FY’15-17E (1.2x GDP)
Manufacturers adding ~40 MT over FY’16-18, 10% of the current operational capacity of
390 MT, translating in a capex of Rs 300 bn. Capacity addition pace is slowing down leading
to improvement in utilisation for existing capacity (incremental demand of ~60mt against
incremental capacity addition of ~40mt over FY16-18)
Steel consumption to grow at 7-8% per annum during the medium term
An additional capacity of ~20 mn tonnes would be added over the next 2-3 yrs.
The Indian IT industry is US$120 bn. IT exports expected to grow at 11% CAGR to reach
US$ 175-225 bn in 2020. Domestic component will grow to US$ 50 bn, equal to current
exports.
After two yrs on 20% CAGR drop &16% growth in FY15, MHCV segment is likely to show
15% CAGR for FY15-17E on better replacement demand, fleet expansion on stronger
recovery in industrial activity in 2HFY16 and increase in mining & infrastructure.
Passenger segment too will pick up with ~9% CAGR for FY16-17 v/s 4% growth in FY15
METALS Iron ore production to move up across the country after the removal of the ban.
Aluminium capacity to move up by 0.6 mn tonnes over the next 2 years.
Zinc to expand by 0.2 mn tonnes over next three years.
12
Power – Opportunity exists, awaiting +ve actions from Govt.
Integrated Energy Policy suggests rise in capacity from 130 GW in FY07 to 800 GW by FY32. 130 GW (of 170 targeted) more likely during FY08-17
12th Plan Share of IPP driven projects (40 GW) to increase - PGCIL Likely to spend Rs 538 bn, total transmission spend pegged at over Rs 1,000 bn. T&D reforms which remained lack luster over the last 4 years will drive demand in the 12th Plan with fresh impetus by the new Government through investment led programs like IPDS (replacing R APDRP), PDDUGY on feeder separation scheme (encompassing Rural electrification programme). Urbanisation, smart cities & manufacturing led “Make in India” economic growth will support long term growth
Long term annual demand for transformers estimated at over 2L MVA – meeting current capacities, but the near term outlook is challenging as industry sits on just about 60-70% utilization levels.
Expect government to accelerate actions to further ease structural constraints of power sector (Fuel prices & availability, environmental and land clearances) through positive policies. Further, SEB FRP to help ease working capital stress and help revive State T&D investments.
As the transformer industry continues to consolidate over the next 6-12 months with intense competitive environment, price pressures seem to have bottomed out. Only the fittest with stable balance sheet will survive and be able to leverage the next leg of growth.
Government Spending – Power
(FY’07-12E)
Rs. 5,338 bn
Source: Industry Sources
Generation
58%
T&D
42%
Long term T&D investments over the
12th Plan period
(FY12E-17E) expected to be 2x, at Rs
1,000 bn
13
Strong Balance Sheet
Debt free Company, insulated in high interest scenario with strong Balance
Sheet.
No money raised from public except for Rs.0.30 mn at incorporation stage
and issue of shares to Promoters, Relatives & Associates of Rs.1.95 mn in
the year 1991.
Adequate cash and liquid investments to fund future growth plans.
Cash Terms offered to vendors to get competitive prices and preference in
delivery.
Business overview
and Company Data
15
Total shares outstanding: 10,117,120 shares
Shareholding Pattern As on 31.03.2015
Promoters
47.48%
Mutual Fund /UTI/FI/Banks
10.50%
FIIs
28.97%
Bodies Corporate
5.17%
Others
7.88%
16
Profit & Loss Statement (Annual)
Year ended 31 Mar (Rs
mn) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Net Sales 5,553.46 6430.64 5419.7 5262.93 5698.1 5155.02 4447.75 5168.87
Expenditure 4,374.86 4932.06 4361.72 4595.12 5280.81 4813.24 4298.06 4971.40
Materials Consumed 3,913.68 4441.89 3810.94 3915.08 4563.1 4130.30 3670.06 4255.28
Staff Cost 168.34 177.88 154.91 159.31 188.1 197.63 184.45 212.21
Manufacturing Expenses 186.87 210.61 197.05 251.43 331.47 257.98 226.33 277.93
Selling & Admin exps 105.97 101.68 198.81 269.29 198.14 227.33 217.22 225.98
EBITDA 1,178.60 1498.58 1057.99 667.82 417.2 341.78 149.69 197.47
Interest & Bank Charges. 5.04 4.67 7.4 7.94 4.8 4.91 3.67 3.00
Depreciation 31.33 44.65 59.71 74.96 82.7 76.74 71.33 72.18
Other Income 107.58 239.7 232.12 183.08 154.5 200.20 267.44 211.64
PBT 1,249.81 1688.96 1223 767.99 484.3 460.32 342.13 333.93
Tax 450.76 540.94 397.69 250.19 151.5 131.34 79.24 49.80
PAT 799.05 1148.02 825.31 517.81 332.7 328.98 262.89 284.13
Impact of charges in
accounting - - - -
Net Profit, restated 799.05 1148.02 825.31 517.81 332.7 328.98 262.89 284.13
Key Ratios (%) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY14
EBITDA Margin 21.22 23.3 19.52 12.69 7.32 6.63 3.37 3.82
Net Margin 14.39 17.85 15.23 9.84 5.84 6.38 5.91 5.50
Raw material as % of
Sales 70.47 69.07 70.32 74.39 80.08 80.12 82.51 82.33
Staff cost % of sales 3.03 2.77 2.6 2.70 3.3 3.83 4.15 4.11
YOY Growth (%)
Revenue 36.85 15.8 -15.72 -2.89 8.27 -9.53 -13.72 16.21
EBITDA 92.11 27.15 -29.4 -36.88 -37.52 -18.10 -56.20 31.92
Net Profit 101.98 43.67 -28.11 -37.26 -35.74 -1.14 -20.09 8.08
17
Annexure – Balance sheet
Year ended 31 Mar (Rs
mn) FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Shareholders Funds 1,646.67 2,646.74 3,324.32 3,736.16 3951.39 4102.82 4247.35 4408.16
Share Capital 101.17 101.17 101.17 101.17 101.17 101.17 101.17 101.17
Reserve & Surplus 1,545.50 2,545.57 3,223.15 3,634.99 3850.22 4001.65 4146.18 4306.99
Loan Funds 10.42 - - - - - - -
Secured Loans 10.42 - - - - - - -
Unsecured Loans - - - - - - - -
Deferred Tax Liability - - - - - - - -
Miscellaneous
Expenditure - - - - - - - -
TOTAL 1,657.09 2646.74 3,324.32 3,736.16 3951.39 4102.82 4247.35 4408.16
Fixed Assets 194.49 324.23 472.66 566.71 548.67 519.46 470.69 410.94
Gross Block 324.53 370.69 682.1 876.27 937.46 985.82 1003.65 1013.6
less: Depreciation 146.96 190.3 244.7611 317.81 396.78 466.36 532.96 602.66
Net Block 177.57 180.39 437.34 558.00 540.68 519.46 470.69 410.94
CWIP 16.92 143.84 35.32 8.71 7.99 0 3.64 13.9
Investments 581.05 1352.51 1426.79 1001.47 1098.54 1737.15 2184.52 2106.52
Deferred Tax Assets 2.53 4.62 1.93 -3.26 -2.80 3.36 6.62 19.83
Net Current Assets 879.02 965.37 1423.16 2170.69 2306.98 1842.85 1581.88 1856.97
Current assets, loans &
advances 1,772.94 1664.5 2065.59 2731.82 2877.62 2348.67 2147.14 2402.1
Inventories 806.53 522.69 605.25 881.81 1021.62 718.37 573.03 816.31
Sundry Debtors 826.1 1018.53 1304.31 1444.81 1739.89 1452.55 1427.43 1444.54
Cash & Bank balance 46.1 60.64 43.48 285.13 48.16 109.63 11.28 33.17
Loans & Advances. 94.21 62.64 112.55 120.07 67.95 68.12 135.4 108.08 Less: Current Liabilities
& Provisions 893.92 699.13 642.43 561.13 570.64 505.82 565.26 545.13
TOTAL 1,657.09 2646.74 3324.58 3736.16 3951.39 4102.82 4247.35 4408.16
18
Business Overview
Optimal product mix with 3 independent profit making strategic business units equipped to
manufacture highly customized different application transformers upto 100 MVA, 220 KV
Oil filled Transformers constitute 81% of sales while Dry Transformers comprise about 19%
Product-wise Revenue Split
Type of Transformer Range
Power Transformer 5,000 KVA,33 KV to 125,000 KVA, 220 KV
Distribution Transformer 315KVA, 11KV to 5,000 KVA, 33KV
Dry Type Transformer 63 KVA, 11KV to 7,500 KVA, 33KV
Product Portfolio
38% 38% 38%49% 49%
35% 36% 36% 40% 39%
39% 39% 42%32% 31%
38% 39% 41% 39% 42%
23% 23% 20% 19% 20% 27% 25% 23% 21% 19%
0%
20%
40%
60%
80%
100%
FY'06 FY'07 FY'08 FY'09 FY'10 FY'11 FY'12 FY'13 FY'14 FY15
Power Transformer Distribution Transformer Dry Type Transformer
Risk & Concerns
20
Risk and Concerns
RAW MATERIAL COST :
The unprecedented variation in the prices of raw materials, particularly copper, transformer oil and special steels for lamination, is a major area of concern for executing transformer orders in uncertain market condition, wherein at times some projects get stuck midway. The present challenges is managing orders within the budgeted cost and managing supplies chain to honor delivery commitments. Rise or Volatility in the prices of Copper, CRGO, Transformer Oil and Steel may impact the margin of the Company.
Depreciation of Indian Rupees against US Dollar is adversely impacting profit margin, in view of
high import contains of input materials.
COPPER PRICE MOVEMENT DURING FY 14-15
421 417 421
434 436427
420 415404
395
371
388396.9 401.4
394.4
422.35413.5
407.2 403.7 403.65
390.75
332.4339.65
355.15
300
350
400
450
500
550
AP
R'1
4
MA
Y'1
4
JUN
E'1
4
JULY
'14
AU
G'1
4
SE
P'1
4
OC
T'1
4
NO
V'1
4
DE
C'1
4
JAN
'15
FE
B'1
5
MA
R'1
5
MONTHS
Pri
ce (R
s/K
g)
HIGH
LOW
21
Risk and Concerns
COMPETITION :
Huge Capacity addition has taken place in the transformer industry, as all the players have
expanded their capacities and some have moved up the value chain by entering in to manufacture
of higher voltage class and rating transformer to take benefit of projected increase in demand of
transformers from the user industries. Further continued strong presence of foreign (Chinese &
Korean) transformer manufacturers is keeping the competitive pressures high. This new capacities
is putting tremendous pressure on the growth of revenue and margins of the Company. We expect
this pressure to continue during the year 2015-16 also. However, stress on localization & “Make in
India” should help to ease these concerns in long term.
GOVERNMENT POLICY :
Any delay by Government in implementation of its plans would lead to a fall in demand for
transformers, used in the generation, transmission and distribution segments, as transformer
demand is driven by addition in power generation capacity.
Further, change in Government policy on land acquisition for industrial projects, allotment of natural
resources and its pricing and policy changes in environmental related laws is having major impact
on corporate capex / investment in new projects.
Thank You