Crompton Greaves
BSE: 500093 | NSE: CROMPGREAV | ISIN: INE067A01029 | Electric Equipment
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Chairman's Speech | Year : Mar '09 |
In the first week of July 2008 the spot price for crude oil was being
quoted at over US$ 145 per barrel, with everyone predicting it wouId
cross the US$ 200 mark. Oil was not the only commodity whose price was
going through the roof. The prices of gas, coal, steel, copper, zinc,
other metals and all key minerals were rising with every passing day.
The bankruptcy of Lehman Brothers on 14 September 2008 caused the
meltdown of the entire financial system that continued right up to
December 2008.
This has been followed by the economic crisis of the real sectors:
sharp drop in demand, GDP and world trade, followed by recession and
rising unemployment in all developed economies. Today, the financial
crisis is a thing of the past because of massive and unprecedented
interventions by governments and central banks across the world. But
the recession and economic slowdown continues. Every country is either
suffering from shrinking GDP or sharply reduced growth.
As I write to you, the global situation continues to be quite bleak: -
Although most experts believe that the US economy will bottom out by
the end of the third quarter of 2009, the estimated GDP growth for the
year will be-2.9%. In April 2009, unemployment was ruling at 8.9%, and
rising. The first four months of 2009 has seen 2.7 million net job
losses, in addition to 1.7 million in the last quarter of 2008.
- The Euro area is in a deep recession. GDP growth for 2009 is
estimated at-3.7%.The UKs GDP growth for 2009 is just as bad: -3.7%.
- Japan may be heading towards yet another long term crisis. Industrial
output has been falling by more than 30%; and GDP growth for 2009 being
estimated at-6.4%.
- With an estimated 11 % to 12% fall in the real value of world trade
in 2009, Chinas growth is expected to reduce to 6.5%.
- Indias growth is down from the 9% plus range of the last three years
to 6.7% in 2008-09, with the chances of it being the same in 2009-10.
In such difficult times, your Company has performed extraordinarily
well. It has significantly grown consolidated revenues and profits;
acquired new businesses; and has successfully positioned itself as an
integrated products, systems and solutions provider across all its
businesses both in India and overseas. If anything, your Company has
accelerated in its journey to be a globally significant player in the
spaces that it operates.
Let me share with you some key financial facts about your Company for
FY2009.
Net sales and services grew by 28% to Rs.8,737 crore in FY2009, which
was a 7 percent point increase in the growth rate over the previous
year.
- Earnings before interest, depreciation, taxes, and amortisation
(EBIDTA) increased by 30% to Rs. 1,054 crore and grew faster than the
top-line.
- Earnings before interest and taxes (EBIT) rose by 36% to Rs.933 crore
in FY2009 and grew faster than EBIDTA.
- Profit before taxes (PBT) grew by 41 % to Rs.867 crore with PBT
rising faster than EBIT.
- Return on capital employed (ROCE) increased to 36.4% up by 460
basis points from FY2008.
- Earnings per share (EPS) were up 38% to Rs. 15.27 in FY 2009.
These numbers highlight an outstanding performance for which all credit
goes to your Companys management. Given the people- strength of
Crompton Greaves throughout the world, I have every reason to believe
that we will continue to see robust profitable growth in the future.
This brings me to the subject of opportunities. Companies grow by
identifying opportunities earlier than others, and seizing them before
their competitors. While we continue to grow and look for opportunities
globally, we should not neglect our home market, the source of our
strength and stability.
We see several growth opportunities, of which I shall share three.
The first has to do with power generation. Given the huge shortfall in
power demand in India the average nation-wide gap between peak demand
and supply was 13% in 2008-09 - there is massive scope for creating
long term income streams through power generation. We believe that the
profitability of generating power in India would not only be
substantial, but also be more long lasting than from being a supplier
of transmission and distribution equipment.
You may recall that, to gain experience in power generation and
distribution, Crompton Greaves had acquired a 59% shareholding in the
Malanpur Captive Power Limited, which now successfully operates a 26 MW
gas based group captive power plant at Malanpur, Madhya Pradesh. We had
also successfully bid for power distribution across the city of Nagpur
which, unfortunately, has not taken off due to regulatory and other
local level hurdles. We, however, continue to try and resolve the
issues with the concerned authorities.
In keeping with the strategic need to be in power generation, the Board
of Directors of your Company has unanimously approved a strategic
investment of up to Rs.227 crore to purchase 41% of the shares in
Avantha Power and Infrastructure Limited (APIL) at a book value,
estimated at approximately Rs.11 per share. APIL, an Avantha Group
company, is engaged in the generation, transmission and distribution of
electricity. Today, it operates four captive power plants with an
aggregate capacity of 95 MW, which is being expanded to 165 MW. in
addition, it is establishing two new independent power producer (IPP)
plants, each with a capacity to generate 600 MW in Chhattisgarh and in
Madhya Pradesh. APIL has already purchased most of the required land,
obtained the required environmental clearances and coal linkages, as
well as ancillary support infrastructure like water supply. It has also
finalised debt financing of the projects through reputed banks. It is
in discussion with various power traders for tying up long term power
purchase agreements. Sudhir Trehan, the Managing Director of your
Company is the non-executive Chairman of APIL. Moreover, two
independent Directors of your Company are being nominated to sit on the
APIL Board. We believe this will be a significant opportunity for
Crompton Greaves to expand its footprint into the business of power
generation.
The second strategic issue relates to India. Most commentators will
agree that it is eminently possible for the country to achieve a long
term GDP growth of 7.5% per annum on a sustained basis. Indeed, many
believe that it could be better still. Even at 7.5% CAGR,
India will be the second fastest growing large economy of the world
second only to China. That makes the country a very attractive place
to expand businesses.
Your Company and the name Crompton Greaves enjoys a great reputation
and considerable franchise throughout India. It is our strategic intent
to leverage this reputation and bring about quantum leaps in our Indian
businesses. By that I mean all our three key businesses:
- The power sector from smart solutions and services to design,
engineering, equipment supply and erection in power generation,
transmission and distribution.
- The industrial sector across all our current plays in motors,
alternators, railway transportation and signalling equipment - unified
by drives, instrumentation, control panels and end-to-end solutions.
- The consumer business fans, lighting, luminaires, pumps and
appliances with a major focus on leveraging the ever-increasing
potential of up-country and rural markets. We want our revolutionary,
power savings 5 watt LED lamp Pharox, which has a luminosity of 40
watts, to create waves in India; just as we want Crompton Greaves to be
the brand of choice in every area that it operates, not just in India
but throughout the sub-continent.
The third strategic mission is to create a global mindset for all our
businesses. By that I mean a mindset that creates one-world quality;
shares best practices across all locations and businesses; recognises
that customers want smart solutions, not just equipment; and through
internal efforts as well as strategic acquisitions, becomes a global
player in providing best-in-class end-to-end solutions. This journey
has begun in the Power Systems business with the integration of our
newer service and solutions-based international acquisitions Microsol
in the UK and Ireland, MSE in the USA, and Sonomatra in France. It is
also coming into play with Pauwels, Ganz and the Power Systems business
in India working in close coordination. I am seeing it happen in
Industrial Systems. And with our new products and offerings in the
Consumer business, I am sure you will see a rapid growth in solution
centric approaches there as well.
Finally, your Company must grow through its own Intellectual Property.
We have made a beginning here as well and I hope to be able to come
back to you with more substantial details in the coming years.
This has been yet another excellent year for your Company. But it is
just the beginning. We have to fuse our excellence in execution with
major strategic plays to become game changers in all our businesses.
Given the capability of your Companys management and all its
employees, I have no doubt that we will get there. Sooner than we
think.
Thank you for your support.
GAUTAM THAPAR
Chairman |
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| Source : Religare Technova | |
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