I am presenting the 20th Annual Report of your Company with confidence faith andoptimism notwithstanding the downtrend in Indian and global economies.
My words have been chosen with care and prudence.
Confident: Because we have consistently demonstrated our credibility in growingagainst odds.
Faith: Because our confidence has been derived from an inner strength and ourworkforce.
Optimistic: Because we have invested in strategic plans and programs to sustainablegrowth across the foreseeable future.
The big message that one needs to send out is that Power Mech has shifted gears. TheCompany is widening its focus from power to non-power industries (RailwaysInfrastructure Irrigation Cross-country pipelines Transmission & DistributionPetrochemicals Steel etc.) even as it continues to deepen its presence in traditionalbusiness segments like ETC and O&M.
This focus on traditional competencies and emerging businesses has transformed theCompany's respect scale and competitiveness As on 31 March 2019 the Company's orderbook was a record Rs 6894 crore. I am pleased to report that the Company possesses thecompetence and knowledge to execute this order book in a timely efficient and profitablemanner through a culture of focus reviews and benchmarking.
This competence was reflected during the year under review when the Company reportedattractive financials despite the prevailing economic weakness and business uncertainty.
The Company reported a growth in revenue from Rs 1555 crore in FY 18 to Rs 2275 crorein FY 19; net profit was Rs 122 crore in FY 19 as against Rs 79 crore in FY 18. Yourcompany achieved its highest revenues of Rs 2275 Cr for 2018-19 with a growth of 46%based on new business segments like the nonpower sector and growth in the O&M segment.
One of the most positive changes to have transpired has been in the order book mix. Asthe Company diversified and expanded its order book progressively broadbased enhancingresponsiveness to opportunities on the one hand and reducing the overall business risk onthe other.
Revenue for Erection Testing and Commissioning (ETC) was 33%; O&M proportion was25% Civil & Railways revenues was 37% and Electricals revenues was 5% of the totalcontract revenue for the year FY2018-19. We are optimistic that this broadbasing willdrive our next round of growth across the coming decade.
At Power Mech we believe in the saying that Every slowdown has its time and whatfollows is leaping growth.' It is a fact that the down ward investments and capacityaddition of Coal based power plants in power sector had its impact with capacity additioncoming down from 20000mw in 2016 to 4000mw in the preceding year. This was a huge crisisfor the Company's operations.
We considered this crisis as an opportunity for change and bring in new ideas ofbusiness both from the type of business and also geographical expansion. We had theinkling of this crisis and tremendous efforts were made to identify new segments ofbusiness in the construction space in various Non-Power sectors in the last 3 years. Oneof the key factors for achieving growth with profit has been redeployment of our hugeresource base timely with vistas into new business segments which was a necessity forsustainability of company's financials. This had enabled to fully utilize huge resourcebase of the Company established for meeting the power sector growth in 11th and 12thplans.
The Company entered a new segment of long-terms Operations and Maintenance of newlyinstalled power plants particularly targeted in the private sector. I am happy to statethat we are working across about 53400MW of power plants through long-term O&Mcontracts. Your company has emerged as the leader in this market which has generatedrevenue and profitability growth. This business has become a bed rock of our operationsand a recurring part of our business model based on a renewal of contracts on a sustainedbasis.
Your company is continuously focusing on the new investments taking place in non-powersector especially the Oil and Gas Sector involving crosscountry gas pipe lines andrefinery expansions. The Company is also addressing investments in the steel andpetrochemical sectors coupled with large investments of Rs 100 lac crore in the next fiveyears being planned in the Infrastructure sector. In the Railways sector more than Rs 1lac cr is being invested each year. Even though there has been a downtrend in capacityaddition of new coal-based units around Rs 1.4 lac crore investments are being planned inthe next five years in emission reduction technologies for existing coal-based plants of166GW. In the Middle East and Bangladesh where we are working in about 10 projectssustained energy investments are a reality with the installed base in the Middle Eastexpected to go up to 499 GW and in Bangladesh to 61 GW by 2035 and 2041 respectively.
The installed base in India of 225GW of coal & gas-based power plants (out of thetotal installed base of 359GW) also represents opportunities for long-term O&Mcontracts with a focus on power plants of Centre and States where your Company hasachieved initial breakthroughs.
The result is that we foresee a widening of opportunities given our willingness toembrace technically challenging projects marked by relatively low competition. The resultis that we enjoy the unique advantage of being able to pick and choose projects that offerattractive margins credit worthy customer profiles and growing volumes.
I am happy to state that new business segments in Oil & Gas sector Railways Infraworks and Steel Electrical works in T&D Railway Electrification ETC Structuraland Civil works across various new segments of business are doing well and this gives methe satisfaction that our efforts in market diversification is bearing fruits forsustained business growth and we are on the right path.
Our optimism is derived from our broadbased presence across States countries multiplefields diversified service profile and diverse infrastructure segments. As a focusedstrategy we will aggressively seek O&M projects in non-power sectors (PetrochemicalsProcess industry Steel Electricals and Overseas Business etc.). In doing so we expectto capitalise on our deep expertise and experience in O&M projects for power plantsacross two decades leveraging on their synergies and similarities.
The time has come for our Company to build on volumes and generate superiororganisational value. The Company is deepening its focus on businesses segmentwise toenhance operating efficiencies financials and cash flows making the Company debt-free. Amore frequent engagement between SBU and profit centre heads is strengthening controlexecution profits and liquidity.
The result is that we are confident of strengthening our performance during thischallenging economic phase.
During FY2018-19 the Company completed unique and prestigious projects with speedstrengthening its credentials. The AMTZ project in Andhra Pradesh was a first of its kindin the country; the Company played a significant role in its execution completion andcommissioning a feather in its cap.
The other significant project being executed is the 2x660 MW Maitree project inBangladesh a collaborative Indo-Bangladesh engagement.
By the close of the year under review your Company was concurrently working on 55projects and 41 operational facilities including 10 projects in Middle East NigeriaBangladesh and Bhutan. The new challenge for your Company is to fully utilize theorganizational infrastructure created for sustained business growth profitability andcustomer satisfaction.
The other major feature of business growth and diversification was the restructuringprocess started two years ago. Today your Company has seven business verticals resultingin higher operational accountability focused marketing and a go to market'approach.
Your Company is making fundamental changes to enhance global visibility and attractinternational business even as it endeavours to deepen its presence in the domesticmarket strengthening its geographically-dispersed personality across the next five years.
To make this aspiration a reality the Company intends to recruit skilled andexperienced professionals to enhance execution capabilities.
Navigating the large organization through sectoral unpredictability has been possibledue to the robust support of our stakeholders. I am thankful to all of them. I am alsoindebted to shareholders for their faith and support. I must specifically mention the roleof State/Central government departments and financial institutions for their cooperation.I am grateful to my colleagues in the Board for their guidance. My sincere thanks are duealso to our employees across levels for making the growth a reality.
I must also thank the Directors and employees of our subsidiary and joint venturecompanies who contributed significantly.
S. Kishore Babu
Chairman & Managing Director