FROM MANAGING DIRECTOR'S DESK
Dear Sanghvi Stakeholders
It gives me immense pleasure to communicate with you after been elevated as ManagingDirector of Sanghvi Movers Limited (SML) Asia and India's largest crane rental companyand the sixth largest in the world. I am acutely conscious of the duty entrusted to meand of the confidence shown by the Board of Directors in elevating me to this position ofleadership in our great company.
Sanghvi Movers Limited has lost its founding father; Chandrakant Sanghvi whoseinspiring leadership established this company and whose unwavering commitment to growthand dynamic vision continue to inspire us today. My father Chandrakant Sanghvi foundedSML in 1989 with the purchase of a single crane his first a brand new Tadano TG 700E. In1995 he took the company public and used the IPO proceeds to purchase a Demag CC 2400 450MT crawler crane and other equipment. In 1997 he chartered a barge from Singapore toIndia and bought over 36 cranes leading to a breakthrough project at the RelianceIndustries Limited Jamnagar Gujarat. Every time Chandrakant Sanghvi would select a cranemodel/capacity he would go on to own the largest fleet of that crane model/capacity inthe world. For this and so many reasons he was well respected in the Indian businesscommunity and the world over as a leader in this industry.
My father's creative zeal and spiritual journey were embodied in his love for artnature and sculptures. This is never more evident than at SML's head office and workshopwhere his numerous paintings are displayed and 10000 trees have been planted.
I thank each and every stakeholder for their trust in our Company and in itsleadership. Confident in your continued and wholehearted support I promise that we willtake Sanghvi Movers Limited to the next level of sustainable growth and profitability. Wewill build on the foundation that is Chandrakant Sanghvi's legacy. With every lesson Ilearned from my father in mind I look to the future with determination and confidence.
Financial Performance for FY 2018-19
Your Company has achieved a turnover of Rs. 282.40 Crores (FY 2017-18: Rs. 228.40Crores) and thereby registered a top line growth of 24% in FY 2018-19. SML achieved anaverage capacity utilization of 58% in FY 2018-19 (FY 2017-18: 41%). The leadership teamand every single employee is singularly focused on improving EBITDA and returning yourCompany to profitability.
In spite of a turbulent business environment SML has serviced its debt on time. Withavailable cash accruals from business operations and partly through asset monetizationyour Company has repaid term loans of Rs. 99 Crores during the financial year 2018-19including pre-payment of term loan installments of Rs. 22 Crores due in
FY 2019-20. The term loan installments due within one year in FY 2019-20 are Rs. 91Crores. In addition your Company is planning to further reduce debt by prepaying termloans of FY 2020-21 to the tune of Rs. 30-40 Crores from available cash accruals and assetmonetization.
The revenue contribution from the windmill sector was 46% (FY 2017-18: 54%) andremained muted as overall industry capacity addition was below expectations. The renewablewind energy sector faces protracted problems as a result of changes in government policiesspecifically dealing with the methodology for bidding on windmill projects (a transitionfrom a Feed-In-Tariff to an Auction Based Tariff).
Annual windmill installation in India during the last four years were as follows:
| ||Financial Year ||Wind Mill Installation |
|1 ||FY 2015-16 ||3300 MW |
|2 ||FY 2016-17 ||5400 MW |
|3 ||FY 2017-18 ||1700 MW |
|4 ||FY 2018-19 (E) ||<2000 MW (#) |
(#) as per industry estimates
Our Future Growth
SML has seen an improvement in the order book in the current year supported by bettercapacity addition in the renewable wind energy sector and others. SML has also addedsignificant new non-wind clients in FY 201819 from other sectors including steel metrorailways roads and bridges ports cement industrial erection hydrocarbonpetro-chemicals and refineries. SML is also currently working with all the businessverticals of Larsen & Toubro Limited.
Several refineries such as HPCL-HMEL Bhatinda BPCL Kochi HPCL Vizag HPCL MahulIOCL Haldia Panipat Vadodara Bongaigaon Baruni are either undergoing upgradation tomeet Bharat Stage VI emission norms or capacity expansions. A brownfield petrochemicalcomplex at HMEL Bhatinda is presently under construction and work will start by the end ofCY 2019 at HPCL Barmer a greenfield refinery.
In the fertilizer space Hindustan Urvarak and Rasayan Limited (HURL) a joint venturebetween Coal India Fertilizer Corporation of India and Hindustan Fertilizer Corporationis currently constructing plants at Barauni Bihar and Sindri Jharkhand. Each plant willbe capable of producing 2200 TPD ammonia and 3850 TPD urea. Also HURL has startedconstruction of the Gorakhpur fertilizer plant at a cost of Rs. 5500 crores with acapacity of producing 3850 million TPD urea. State-owned Rashtriya Chemicals &Fertilizers Ltd (RCF) said it will start work on the coal gasification-based fertilizerplant in Talcher Odisha by the end of 2019.
In the steel sector JSW is building a new integrated 5 mtpa capacity flat steel plantat 15000 Cr in Dolvi Maharashtra which is to be completed by FY 2019-20. JSW is alsoinvesting Rs. 7500 cr in Bellary Karnataka for capacity expansion and setting up a newcoke oven plant. The expansion would enable the company to increase plant capacity to 13mtpa by March 2020. Tata Steel Limited (TSL) has begun a 5 mtpa Phase-II expansion of itsKalinganagar plant at Rs. 23500 cr to be completed in the next 48 month. Looking forwardTSL has planned to scale up the nameplate capacity at its newly-acquired Tata Steel BSL(BSL) formerly Bhushan Steel Ltd to 8.3 mtpain FY 2020-21.
Core infrastructure projects such as the Mumbai-Trans Harbour Link Mumbai Coastal RoadProject Mumbai Nagpur Samruddhi Mahamarg highway project river interlinking projectsbuilding of Andra Pradesh's new capital in Amaravathi construction of India InternationalConvention and Exhibition Centre (IICC) Dwarka Delhi have led to an increase in thedemand for cranes.
Elevated and underground metro projects currently under construction or in planningstages in Pune Mumbai Nagpur Jaipur Indore Hyderabad Bhopal Bangalore andAhmadabad also create a strong demand for cranes. Construction is scheduled to begin inthe CY 2020 on a high speed bullet train from Mumbai to Ahmadabad which will also resultin huge demand for construction equipment.
The sharp decline in wind power installation during FY2018 and FY 2019 E has had someimpact on company revenues and on profitability. However given the 10000 MW capacityaddition awarded by SECI and state power utilities wind installation will witness astrong recovery over the next 12-18 months. This capacity addition will in turn providestrong revenue visibility for your company. As per Industry estimates windmillinstallation in India will increase to 4000-4500 MW in the current financial year i.e. FY2019-20 (FY 2018-19: ~ 2000 MW).
Your Company has a secured order book of Rs. 170 Crores through 05.06.2019 and isoptimistic about its financial performance in FY 2019-20 primarily on account ofincreases in business volume from the renewable wind energy sector and others. Themanagement hopes to achieve top line growth of 25% in the current financial year FY2019-20 with a major spike in business volume in H2 FY 2019-20.
Returns to Shareholders
We remain confident that over the long term our laser focus on debt reduction andfinancial discipline and our consistent emphasis on improving EBITDA will all contributeto increasing shareholder value. As committed stakeholders in Sanghvi Movers we lookforward to your continued support and to shared prosperity.