Triveni Engineering

The true test of a business is the resilience of its performance in
 really hard times. The present environment of economic turmoil has
 raised questions on the viability of many a business. On that score, I
 take pride in reporting to you that Triveni Engineering stands robust
 and confident.
 
 It has positioned itself in industry segments that will continue to see
 growth in off-take and improvement in operating parameters. Having
 continuously developed significant organisational capabilities, Triveni
 can withstand external challenges and to a very great extent, mitigate
 the risks inherent to the businesses in which we operate.
 
 Our performance in the year under review is testimony to the
 effectiveness of our strategies. We have registered the highest ever
 turnover of Rs. 15.9 billion and an operating profit of Rs 3.2 billion,
 higher by 153 per cent over the corresponding twelve months.  At a
 segmental level, the PBIT of sugar business, buoyed by an improvement
 in realisation in the fourth quarter of the financial year, reported a
 turnaround from a loss of Rs. 899.8 million in the past twelve months
 to PBIT of Rs. 358.8 million in the current 12 months. For the similar
 period, the engineering business continued to register positive growth
 of 27 per cent in PBIT.
 
 All the same, it is more important today to look ahead with positive
 confidence than look back with satisfaction. The theme of this annual
 report enunciates our approach towards everything we do: courage
 tempered with prudence, and healthy realism tempered with strength of
 purpose.  It is possible! We know our optimism will be severely tested,
 but we are confident of sustaining our record of continuous value
 creation.
 
 With good reason.
 
 The first good reason is the composition of our business portfolio.
 
 Our two major business segments – sugar and engineering - are mutually
 exclusive in terms of growth factors and environment.
 
 The sugar business is immune to the upheavals in the global economy,
 and dependent only on the sugar cycle. Indian sugar production was 26.3
 million tonnes in the 2007-08 season as against 28.3 million tonnes in
 2006-07.  Meanwhile two successive years of high production had caused
 a large build-up of inventory. Inevitably, this further reduced
 realisations.  As a result, sugar companies suffered losses and made
 delayed payments to farmers, which forced many farmers across the
 country to switch to alternate crops that were more remunerative at
 that point of time. Hence, sugar cane production is expected to fall
 tremendously during this season on account of the reduced area under
 cane and climatic factors. With this significant decline in sugar
 production, estimated at about 20 million tonnes during the current
 season, coupled with the rising consumption of about 3-4% year on year,
 we expect that the upturn in the economics of the sugar industry, which
 has already begun, to accelerate in the coming 12 months. Having used
 the downturn for investing in capacities and strengthening farmer
 relations, we expect to crush about the same quantity of cane as in the
 last season.
 
 Our engineering businesses cater to the two most critical industries –
 power and water. Globally, the power sector has been a top priority for
 not just Governments but all industries. With improvements in
 technology, consistent supply of quality power has become an essential
 for the manufacturing sector. To ensure low cost at the same time, many
 industries like steel, metal and cement are increasingly opting for
 captive generation. Similarly, industries such as sugar, textiles,
 paper, pharmaceuticals, fertilisers and petrochemicals, which need
 steam and power as process inputs, are also shifting towards
 co-generation/ captive generation facilities. The Indian Government has
 planned to add another 76400 MW under the 11th Plan. The IPPs,
 co-generation and captive segments will account for almost one-third of
 this addition, resulting in a clear market demand for our turbine and
 gear divisions.
 
 Our initiative in water and waste- water treatment is proving to
 generate good value. Our water business offers world-class solutions to
 industrial and municipal clients in ensuring reusability of water, and
 reduction in contamination, and provides customised solutions for
 desalination, process water, etc. While the world talks of slowdown
 affecting capital goods off-take, our confidence stems from our
 businesses’ catering to diverse relevant segments that are
 indispensible to the growth and sustainability of the economy.
 However, in the short term, a word of caution on the overall economic
 scenario: the liquidity crunch and financial market turmoil may affect
 some of our clients who may have difficulty in arranging finances to
 complete their projects.
 
 The second good reason is the capabilities and capacities we have
 created across our businesses.
 
 Our consistent investments in capacities and capabilities have started
 yielding results. Consider this: we have invested over Rs. 11 billion
 in our sugar businesses by setting up four greenfield capacities apart
 from brownfield expansion of all three existing units. We added
 capacities for by-products such as power and alcohol, and intensified
 farmer relations. These investments have begun to pay off just as we
 are witnessing an upturn in sugar prices, making us an attractive
 player in the segment.
 
 Similarly, we have consistently invested in building capacities and
 introducing a range of products and services in keeping with changing
 customer needs. We have always believed in providing our customers with
 a good value proposition through robust, efficient products of
 world-class quality with the highest levels of customer service. In
 doing so, we have invested in world class machines and equipment on par
 with the best in the industry globally.  We have extended our product
 range in steam turbines to 30 MW, through our in-house Research and
 Development (R&D) efforts. We are continuously investing in R&D in
 association with some of the best design outfits globally.
 
 The third good reason is the opportunity that service and refurbishment
 activities offer.
 
 Being a technology driven organisation, servicing and refurbishment
 offers a great opportunity to us. Our extensive reach, combined with
 thorough expertise and world-class service standards, is enabling us to
 increase our penetration in this market segment. We have invested
 extensively in our service capabilities across our engineering
 businesses.  As a result, we are seeing good growth in the
 refurbishment of old turbines and gearboxes, since during a slowdown,
 refurbishment is largely preferred over buying new equipment. Our core
 expertise in designing and customising plant and equipment, backed by
 our teams of capable R&D professionals, and investments in leading edge
 technology, makes us confident of sustaining our business even in tough
 times. In addition, we as a company are investing in global training
 practices in all our engineering businesses. During 2007-08, the
 company spent 5.74 man-day per officer in training and development. We
 are establishing a dedicated training school in Bangalore for providing
 training in design, engineering and customer care for all the
 engineering businesses.
 
 The fourth good reason is the global opportunity that we enjoy in our
 engineering business.
 
 Core expertise in engineered- to-order products, with superior service
 solutions offering a low- cost operating advantage, keeps us
 attractively poised to cater to the global markets today, especially
 when all industries are looking to reduce cost. We serve the power and
 water sectors, which are very relevant globally. The market for
 distributed power and non- conventional energy is expanding globally,
 and we expect this trend to continue. We have made inroads into this
 area by winning orders from difficult markets like Finland and Korea.
 This gives us the confidence to tap a higher share in these upcoming
 fields globally. Further, with the strengthening of the US dollar, the
 export proposition has become very attractive for our turbine division.
 We are also in talks with a number of international equipment
 manufacturers to be their preferred outsourcing partner for loose gears
 and other precision components.  Our technological investments and
 efficient operations have made us highly cost-competitive in comparison
 to the global players, and this has further strengthened our service
 and refurbishment opportunity in overseas markets.  We are also looking
 to expand our base overseas through partnerships, alliances and small
 acquisitions to fully exploit these opportunities in the course of
 time. To that end, the current environment may give us good
 opportunities in terms of value.
 
 Owing to our inherent strengths, we expect an eventful 2008-09, when
 our raw material procurement initiatives should sustain credible
 performance in a challenging sugar scenario. We also look forward to
 strengthen our engineering businesses, considering our outstanding
 order book from all the divisions which on 30.09.2008 accounted for
 108% of the divisional revenues in 2007-08.
 
 Going forward, times will no doubt be more demanding. But then, we at
 Triveni have prepared well. On this positive note, I would like to
 thank all of you for your continuing support and encouragement. I
 assure you that our commitment remains towards building a strong,
 sustainable and value-creating company.
 
      Dhruv M. Sawhney
 Chairman & Managing Director