In July 2019 after almost five decades the Hon'ble Finance Minister NirmalaSitharaman became the second woman in India to ever present the Union Budget. Thechallenges facing her were vast. The overall unemployment rate has climbed to 6.1% andIndia has lost the tag of the world's "fastest growing economy". Despite thisthe OECD estimates India's GDP growth to be above 7% in the next two years. In the shortrun numbers fluctuate so the important question is "where is the Indian Economyheaded in the future" And will the government do enough to ignite growth
The financial year 2018-19 has been a better year for your company compared with theprevious couple of years. The Transformer division sales turnover has grown 9%despite harsh competition and depressed prices. Order booking was the highest evergrowing by 38%. This is an achievement in such a competitive market that has not seen anyincrease in overall demand. Consolidation in the industry is inevitable as over capacityhas plagued the market for many years now. However new capacities seem to somehow keepbeing added and margins continue to be under pressure. Expanding our customer base hasbeen a focus area for us over the last few years. As a result of this our market reachhas grown substantially.
The Motor business has had a good year registering a strong 42% year-on-yearsales growth. A number of factors have contributed to this growth. A tight rein on pricerealizations implementation of new energy efficiency standards and an increasedgeographic and sectoral coverage have all played a key role. Our division has done well torespond to a sudden spurt in demand by ramping up capacities at short notice. As a resultof these efforts market share has increased significantly. The market factors that drovethis growth may not sustain and we must be cautious in our expectations. For the secondtime in three years we have received the CII (Confederation of Indian Industry) Award forthe 'Most Innovative Energy Efficient Product' for a motor that we have developedin-house.
The Projects division took steps last year to identify certain high potentialbut low risk segments for order input. This has culminated into the booking of some goodorders as per the plan. It will open up further revenue streams in oil and gas defenceand some specific utilities. We continue to be choosy and avoid taking unnecessary risk inthis space.
The Magnet Technology Machines division (MTM) grew 44% on the back ofgood export orders for elevator machines. Our focus in the coming year will be to maintainour leadership in the domestic market and increase export sales. This year we will focuson new product development both in gearless and special direct drive machines. Our newMTM plant has been certified as a 'Green Building' by IGBC (Indian Green BuildingCouncil).
Drives & Automation is working closely with the MTM division to developsolutions that will combine motor and drive to improve productivity and energy efficiencyof equipment. This will have a number of applications in textiles and plastics. Foreignexchange variations have been affecting our margins and we are taking steps to addressthis. Our efforts to leverage the synergies of both these divisions and offer anintegrated solution to the market should pay off soon.
The World Bank expects global growth to weaken to 2.6% for 2019. A number ofmacroeconomic factors are contributing to this. A looming trade war between the world'stwo biggest economies is bound to have repercussions for the rest. In Europe the Brexitstalemate continues in the United Kingdom threatening to split the union itself. EvenGermany Europe's largest economy has cut its GDP estimate to its lowest in the last fiveyears. Trade barriers renewed financial stress and protectionist governments are takingtheir toll. Overall growth is muted and credit is tight.
In India the Modi government has returned with a thumping majority and hopefully theywill be able to push through some major reforms. The task however is challenging with thecurrent NBFC and banking crisis leaving financial institutions staring at an unprecedentednumber of NPAs (non-performing assets). The recent budget in July 2019 has mentioned alarge figure to be allocated to infrastructure. It does not however tell us where thismoney will come from. This kind of stimulus is the need of the hour. Let us hope that thismaterializes soon.