ABB Power Products and Systems India Ltd
Directors Reports
Your Directors have pleasure in presenting their first annual report and audited
accounts for the financial period ended December 31, 2019.
1. Financial results:
(Amount in INR Crores)
| Particulars |
19.2.2019 to 31.12.2019* |
| Revenue from operations |
3,230.74 |
| Other income |
0.47 |
| Total income |
3,231.21 |
| Less: expenses |
2,894.98 |
| Profit before depreciation, finance costs, exceptional items and tax expense |
336.23 |
| Less: Depreciation/Amortisation/Impairment |
48.41 |
| Profit/loss before finance costs, exceptional items and tax expense |
287.82 |
| Less: Finance costs |
26.38 |
| Profit before exceptional items and tax expense |
261.44 |
| Add/(less): Exceptional items |
(40.79) |
| Profit before tax expense |
220.65 |
| Less: Tax expense (current & deferred) |
55.26 |
| Profit for the year (1) |
165.39 |
| Other comprehensive income (2) |
0.50 |
| Total (1+2) |
165.89 |
| Balance of retained earnings transferred pursuant to the scheme of arrangement |
149.93 |
| Less: Transfer to debenture redemption |
- |
| Reserve Less: Transfer to reserves |
- |
| Less: Dividend paid on equity shares |
- |
| Dividend paid on preference shares |
- |
| Dividend distribution tax |
- |
| Balance carried forward |
315.82 |
*Since your Company was incorporated on February 19, 2019, previous year figures are
not applicable
2. Performance review:
During the financial period ended December 2019, orders touched INR 2,641.9 crore. The
orders witnessed a healthy growth reflecting the technology push and continued traction in
transformers and system integration. The order backlog at the end of the year stood at INR
5,100.7 crore which continued to provide visibility to the future revenue streams.
The revenue from operations for your Company for the financial period ended
December 2019 stood at INR 3,231.2 crore, reflecting stability of operations in an
uncertain market situation. Profit before tax was at INR 220.65 crore mainly due to
operational efficiencies. Net profit after tax was at INR 165.39 crore. Consequently, the
earnings per share for the financial period ended December 31, 2019 stood at INR 44.69.
For detailed analysis of the performance, including industry overview, changes and
outlook, please refer to the Management's Discussion and Analysis Report provided in
Annexure – A, forming part of this Report.
3. COVID-19:
Your Company has been responding to the COVID-19 pandemic by looking after its entire
eco-system of employees, customers and suppliers, with focus on health
awareness and safety measures. As a responsible corporate citizen, your Company has always
maintained strict adherence to the direction/ guidelines of central, state and local
authorities.
In accordance with the order of Ministry of Home Affairs' for national lockdown from
March 25, 2020, operations across plants, project sites and offices were closed. Your
Company will resume operations as may be permitted by various governing authorities. While
your Company has made every effort to swiftly adapt to the new norm, the closures will
likely have an impact on its performance which can only be gauged in the quarter ending
June 30, 2020.
4. Dividend:
This being the first year of business operation and consequent to the demerger of Power
Grids Business, your Directors have not recommended any dividend for the period ended
December 31, 2019.
5. Scheme of Arrangement:
A Scheme of Arrangement ("Scheme") was entered into between (i) ABB India
Limited ("INABB"/ "Transferor") (a subsidiary of your Company's
Promoter, ABB Asea Brown Boveri Ltd) and (ii) your Company
("Company"/"Transferee") and their respective shareholders and
creditors, pursuant to the provisions of Section 230 to 232 and other applicable
provisions of the Companies Act, 2013, which provided for inter alia the Demerger of the
Power Grids Business of INABB ("Demerged Undertaking") and the consequent
issuance of equity shares by the Company to the shareholders of INABB as per the Share
Entitlement Ratio.
The Scheme was approved by your Board of Directors pursuant to its resolution dated
March 5, 2019 and the Board of Directors of INABB pursuant to its resolution dated March
5, 2019. Pursuant to an order dated June 27, 2019, passed by the National Company Law
Tribunal, Bengaluru Bench, ("NCLT"), meetings of the equity shareholders and the
creditors of INABB were convened. The equity shareholders and the creditors of INABB
approved the Scheme at court convened meetings, each held on August 9, 2019. The NCLT
approved the Scheme on November 27, 2019. The Appointed Date of the Scheme was April 1,
2019 and the Effective Date was December 1, 2019.
The Scheme provided for the transfer by way of a demerger of the Demerged Undertaking
and the consequent issue of equity shares by the Company to the shareholders of INABB in
accordance with the Share Entitlement Ratio, and various other matters consequential or
integrally connected therewith, including the re-organisation of the share capital of the
Transferee, pursuant to Sections 230 to 232 of the Companies Act, 2013, the SEBI circulars
and in compliance with the Income Tax Act, 1961
6. Board of Directors' response to observations, qualifications and adverse
remarks in Auditor's Report
The Statutory Auditors ("Auditors") have qualified their opinion in relation
to the matters specified in Notes 37 of the Financial Statements for the period ended
December 31, 2019 ("Statements").
The Board's responses to the qualifications and other observations or adverse remarks
are as follows.
a. Qualified Opinion: We have audited the financial statements of ABB Power Products
and Systems India Limited ("the Company"), which comprise the balance sheet as
at 31 December 2019, and the statement of profit and loss (including other comprehensive
income), statement of changes in equity and statement of cash flows for the period from
February 19, 2019 (date of incorporation) to December 31, 2019 ("the period"),
and notes to the financial statements, including a summary of the significant accounting
policies and other explanatory information.
In our opinion and to the best of our information and according to the explanations
given to us, except for the effects of the matter described in the Basis for Qualified
Opinion section of our report, the aforesaid financial statements give the information
required by the Companies Act, 2013 ("Act") in the manner so required and give a
true and fair view in conformity with the accounting principles generally accepted in India,
of the state of affairs of the Company as at December 31, 2019, and its profit and other
comprehensive income, changes in equity and its cash flows for the period.
b. Basis for Qualified Opinion: We draw attention to Note 37 to the financial
statements regarding the Scheme of Arrangement (‘Scheme') for demerger of the power
grid business of ABB India Limited with the Company. The scheme of arrangement
("Scheme") as envisaged and entered into between (i) ABB India Limited
("INABB"/ "Transferor") and (ii) the Company ("Company"/
"Transferee") and their respective shareholders and creditors, pursuant to the
provisions of Section 230 to 232 and other applicable provisions of the Companies
Act, 2013, which provided for inter alia the Demerger of the Power Grids Business
of INABB ("Demerged Undertaking"), with an appointed date of April 1, 2019, has
been approved by the National Company Law Tribunal (‘NCLT') vide its order
dated November 27, 2019 and a certified copy has been filed by the Company with the
Registrar of Companies, Bangalore, on December 1, 2019.
As per the applicable accounting standard Ind AS 103, since this demerger is a
common control business combination, the financial information necessitates
restatement by the transferee at carrying amounts not from the appointed date but from the
beginning of the preceding period in the financial statements which happens to be the date
of incorporation i.e. February 19, 2019. Consequentially, the Company is required as per
Ind AS 103 to give effect to the business combination from February 19, 2019 (date of its
incorporation). However, the Company has recognized the impact of the business combination
only from April 1, 2019 (i.e. the appointed date specified in the scheme). Accordingly, we
are unable to comment on the resultant impact on the Company's statement of profit and
loss (including other comprehensive income), statement of changes in equity and statement
of cash flows for the period from February 19, 2019 to March 31, 2019. However, there is
no impact of the same on the Company's balance sheet as at December 31, 2019.
c. Board's response to qualification in Auditor's Report: The Statutory Auditors
("Auditors") have qualified their opinion in relation to the matters specified
in Notes 37 of the Financial Statements for the period ended December 31, 2019
("Statements"). The Board's responses to the qualifications are as follows.
The management has taken note of the basis for qualified opinion of the Auditors and
believes that due to incoherence between the appointed date i.e., April 1, 2019 and date
of incorporation i.e. February 19, 2019 and auditors opinion on Ind AS 103 such a one off
situation has arisen. Further, in addition to what has been stated in Note 37 of the
Statements, we wish to state that in anticipation of reorganisation of ABB India Limited's
business by way of said Scheme, the Company was incorporated. Such date of incorporation
is not in control of the Company. The Registrar of Companies issued the certificate
of incorporation on February 19, 2019. The management confirms that, during the period
between February 19, 2019 and March 31, 2019, no active business was undertaken other than
the initial paid up share capital. In light of the above, there is no impact on the
financial statements of the Company as at December 31, 2019 as affirmed by the Auditors.
7. Change in the financial year:
Your Company was incorporated on February 19, 2019 with first financial year commencing
on February 19, 2019 and ending on March 31, 2020. Your Company subsequently made an
application to the Regional Director, South East Region, Ministry of Corporate Affairs,
Hyderabad on November 5, 2019 to change your Company's first financial year from February
19, 2019 to December 31, 2019. Pursuant to an order bearing no. F.No:10/19/Karnataka/RD
(SER)/2(41) of 2013/2019/6328 dated December 12, 2019, passed by the Regional Director,
South East Region, Ministry of Corporate Affairs, Hyderabad the Company's financial year
commences on January 1 and ends on December 31 of a given year.
8. Material changes and commitments, if any, affecting the financial position of
the company, having occurred since the end of the year and till the date of this report
and disclosures:
Other than those mentioned in this Report, there have been no material changes and
commitments, which affect the financial position of the Company which have occurred
between the end of the financial period to which the financial statements relate and the
date of this Report.
9. Extract of Annual Return:
As per provisions of Section 92 (3) of the Act read with Rule 12 of the Companies
(Management and Administration) Rules, 2014 as amended from time to time, the extract of
the Annual Return in the Form MGT-9 is given in Annexure – B, forming part of
this report.
10. Board Meetings held during the period:
During the financial period under review, nine (9) meetings of the Board of Directors
were held. The Company re-constituted the Board and has appointed independent directors.
The details of the meetings are furnished in the Corporate Governance section forming part
of this report.
11. Independent directors and compliance on criteria of independence by the independent
directors
The following independent directors were appointed during the period under review and
the Board is of the view that they have adequate expertise, experience and proficiency.
Mr. Mukesh Butani holds a bachelor's degree in commerce from Mumbai University. He
is a certified chartered accountant from the Indian Institute of Chartered Accountants. He
founded BMR Legal Advocates, a tax law firm in India. He has expertise in taxation laws.
Ms. Akila Krishnakumar is an alumnus of Birla Institute of Technology and Sciences.
She was previously the president – global technology and country head of Sun Gard,
which was acquired by Fidelity National Information Services, Inc. She has expertise in
diverse business profiles.
Ms. Nishi Vasudeva holds a bachelor's degree in economics from Delhi University and
is an alumnus of Indian Institute of Management, Calcutta. She was the Chairman and
Managing Director of Hindustan Petroleum Corporation
Limited till March 2016. She has expertise in diverse business profiles.
All independent directors of the Company have given declarations to the Company under
Section 149 (7) of the Act that, they meet the criteria of independence as provided in
Sub-Section 6 of Section 149 of the Act and also under the SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (Listing Regulations). In the opinion of the
Board, they fulfil the conditions of independence as specified in the Act and the Listing
Regulations and are independent of management. The independent directors have affirmed
compliance with the Code of Conduct, as on December 31, 2019. During the financial period,
a separate meeting of the independent directors was not required to be held as Board was
re-constituted and independent directors were appointed w.e.f. December 24, 2019.
12. Nomination and Remuneration Policy of the Company:
The Board of Directors have constituted a Nomination and Remuneration Committee
("NRC") on December 24, 2019. The Remuneration Policy of the Company for
appointment and remuneration of the Directors, Key Managerial Personnel and Senior
Management of the Company along with other related matters have been provided in the
Corporate Governance Report.
The nomination and remuneration policy is available on the website of the Company:
https://new.abb. com/grid/appsil/investors-section/board-of-directors.
A Statement of Disclosure of Remuneration pursuant to Section 197 of the Act read with
Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,
is provided in Annexure – C, forming part of this report.
13. Dividend distribution policy:
As required under Regulation 43A of the Listing Regulations, the Company has a policy
on dividend distribution. This policy can be accessed on the Company's website at
https://new.abb.com/grid/ appsil/investors-section
14. Particulars of loans, guarantees or investments under Section 186 of the Act:
During the period under review, your Company has not granted any Loan, Guarantees or
made investments within the meaning of Section 186 of the Act.
15. Amount, if any, proposed to be transferred to Reserves:
For the financial period under review, your Company has proposed not to transfer any
amount to the General Reserves.
16. Conservation of energy, technology absorption, foreign exchange earnings and outgo:
The particulars as prescribed under Section 134 of the Act read with Rule 8 (3) of the
Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology
Absorption, Foreign Exchange Earnings and Outgo are given in Annexure – D, forming
part of this report.
17. Risk Management:
Your Company has constituted a Risk Management committee on December 24, 2019 and
adopted a Risk Management Policy as required under Companies Act 2013 and Listing
Regulations. The Committee oversees the Risk Management process including risk
identification, impact assessment, effective implementation of the mitigation plans and
risk reporting. The purpose of the Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities with regard to enterprise risk management. The
details and the process of Risk Management are provided as part of Management's
Discussion and Analysis which forms part of this Report.
18. Corporate Social Responsibility initiatives:
The Board of Directors have constituted a Corporate Social Responsibility (CSR)
Committee on December 24, 2019 as required under the Act for implementing
various CSR activities and adopted CSR Policy at its meeting held on April 30, 2020.
Composition of the Committee and other details are provided in Corporate Governance Report
which forms part of this Report. During the period under review, your Company was not
required to spend any amount on CSR activities since the criteria specified in
Section 135 of the Companies Act, 2013 was not applicable and also being the first
year of incorporation. Detailed report on CSR activities as required under the
Companies (Corporate Social Responsibility Policy) Rules, 2014 is given in Annexure –
E, forming part of this Report.
19. Annual evaluation of Board, its Committees and Individual Directors:
Since the Board of Directors were reconstituted effective December 24, 2019, and this
being the first year of operation, your Company was listed effective March 30, 2020,
carrying out of an annual evaluation of Board of Directors of its own performance, its
Committees pursuant to the requirements of the Act and the Listing Regulations, was not
applicable for the financial period under review.
20. Audit Committee and its recommendations:
The Board constituted an Audit Committee of Directors on December 24, 2019. The details
pertaining to composition of the Audit Committee and terms of reference are included in
the Corporate Governance Report, which forms part of this Report. The Board has accepted
all recommendation of Audit Committee, made during the financial period under review.
21. Related Party Transactions:
The Board of Directors have adopted a policy on Related Party Transactions at its
meeting held on December 24, 2019. The objective is to ensure proper approval, disclosure
and reporting of transactions as applicable, between the Company and any of its related
parties.
Transactions with related parties, as per requirements of Indian Accounting Standard
have been disclosed in the accompanying financial statements. Your Company's Policy
on Related Party Transactions, as adopted by your Board, can be accessed on the Company's
website. Link for the same is: https://new. abb.com/grid/appsil/investors-section
ABB Asea Brown Boveri Ltd hold 10% or more shares in the Company. The details of
transactions with promoter/promoter group holding 10% or more shares have been disclosed
in the accompanying financial statements.
Consequent to the Scheme of Arrangement becoming effective from December 1, 2019, to
ensure continuation of operations of the demerged Power Grids business by your Company, it
was agreed to seek certain services from ABB India Limited ("Transferor") by
entering into some Transitional Agreements and also executed certain Lease Agreements.
These agreements fall within the definition of Related Party Transaction under the
provisions of Section 188 of the Companies Act, 2013, requiring disclosures to be made in
Form No. AOC-2 pursuant to Section 134 of the Act read with Rule 8 of the Companies
(Accounts) Rules, 2014 which is attached as Annexure-F.
22. Reporting of frauds:
There was no instance of fraud during the period under review, which required the
statutory auditors to report to the Audit Committee and/or Board under Section 143(12) of
the Act and Rules framed thereunder.
23. Transfer to Investor Education and Protection Fund:
As your Company was incorporated on February 19, 2019, and that no dividend was
recommended/ declared during the financial period ended December
31, 2019 there is no unclaimed dividend during the financial period under review and
therefore, no dividend amount was transferred as required under Section 124 of the Act, to
the Investor Education and Protection Fund ("IEPF") established by the Central
Government. Mr. Poovanna Ammatanda, General Counsel , Company Secretary and Compliance
Officer has been appointed as the Nodal Officer of the Company.
Pursuant to the Scheme of Arrangement (entered into between Company, ABB India Limited
and their respective Shareholders and Creditors) approved by NCLT vide its order dated
November 27, 2019, your Company allotted on December 24, 2019, equity shares to the
shareholders of ABB India Limited. Out of 4,23,81,675 Equity shares allotted, 1,07,421
Equity Shares were directly allotted to the IEPF account as a consequence of issue
of Equity Shares by your Company to the shareholders of ABB India Limited in accordance
with the Share Entitlement Ratio.
As explained above, as no dividend was declared since incorporation of the Company nor
transferred to IEPF, other details like amount of unclaimed/ unpaid dividend and the
corresponding shares were not applicable for the period under review. Also, redemption
amount of preference shares, amount of matured deposits, for companies other than banking
companies, along with interest accrued thereon, amount of matured debentures along with
interest accrued thereon, application money received for allotment of any securities and
due for refund along with interest accrued, sale proceeds of fractional shares arising out
of issuance of bonus shares, merger and amalgamation resultant benefits on shares
transferred to the IEPF, year wise amount of unpaid/unclaimed dividend lying in the
unpaid account upto the year and the corresponding shares, which are liable to be
transferred to the IEPF, and the due dates for such transfer, the amount of donation, if
any, given by the company to the IEPF, such other amounts transferred to the IEPF, if any,
during the period under review are not applicable.
24. Particulars of employees including remuneration of directors and employees:
The information on employee particulars,as required under Section 197(12) of the Act
read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014 as amended from time to time, are given in Annexure-G, forming part
of this report. In terms of Section 136 of the Act, the Report and Financial Statements
are being sent to the Members and others entitled thereto, excluding this Annexure.
This Annexure shall be provided to Members on a specific request made in writing to the
Company. The said information is available for inspection by the Members at the Registered
Office of the Company on any working day upto the date of the 1st Annual General Meeting.
Consequent to the sanction of the Scheme of Arrangement and the effective date of the
Scheme being December 01, 2020, employees pertaining to power grid business were
transferred to your Company. Since the appointed date for the Scheme is April 01, 2019,
details of employees under this section is for the period from April 1, 2019 to December
31, 2019. The Managing Director of the Company did not draw any remuneration from holding
company from the date of his appointment as Managing Director of the Company, i.e.
December 2, 2019. Your Company did not have any joint venture or subsidiary Company.
25. Directors' Responsibility Statement:
To the best of knowledge and belief and according to the information and
explanations obtained by us, your Directors make the following statements in terms
of Section 134(3)(c) and 134(5) of the Act, that:
a. in the preparation of the annual accounts, the applicable accounting standards have
been followed along with proper explanation relating to material departures;
b. they have selected such accounting policies and applied them consistently and made
judgments and estimates that are reasonable and prudent so as to give a true and fair view
of the state of affairs of the Company at December 31, 2019, and of the profit and loss of
the Company for the period ended on that date;
c. they have taken proper and sufficient care for the maintenance of adequate
accounting records in accordance with the provisions of the Act for safeguarding the
assets of the Company and for preventing and detecting fraud and other irregularities;
d. they have prepared the annual accounts on a going concern basis;
e. they have laid down internal financial controls to be followed by the Company and
that such internal financial controls are adequate and were operating effectively;and
f. they have devised proper systems to ensure compliance with the provisions of all
applicable laws and that such systems were adequate and operating effectively.
26. Disclosure on confirmation with the Secretarial Standards:
Your Directors confirm that the Secretarial Standards issued by the Institute of
Company Secretaries of India have been duly complied with.
27. Corporate Governance Report and Certificate:
As required under Regulation 34(3) read with Schedule V (C) of the Listing Regulations,
a report on Corporate Governance and the certificate as required under Schedule V (E) of
the Listing Regulations from Messrs V. Sreedharan & Associates, Practicing
Company Secretaries, regarding compliance of conditions of Corporate Governance are given
in Annexure – H and Annexure – I respectively, forming part of this report.
28. Secretarial Audit:
Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 and amendments thereto,
your Company engaged the services of Messrs BMP & Co. LLP, Company Secretaries,
Bengaluru, to conduct the Secretarial Audit of the Company for the financial period ended
December 31, 2019. The Secretarial Audit Report in Form MR-3 is given in Annexure –
J, forming part of this report.
29. Business Responsibility Report:
As required under Regulation 34 of the Listing Regulations, the Business Responsibility
Report forms part of the Annual Report.
30. Whistle Blower Policy/Vigil Mechanism:
The Company has adopted a vigil mechanism/ whistle blower policy on December 24, 2019
for Directors and Employees to report their concerns about unethical behaviour, actual or
suspected fraud or violation of the Company's Code of conduct. The mechanism provides for
adequate safeguards against victimization of Director(s) and Employee(s) who avail of the
mechanism. The policy provides for direct access to the higher levels of supervisors
and/or to the Chairman of the Audit Committee, in appropriate or exceptional cases.
The Whistle Blower Policy/Vigil Mechanism is available on Company's website :
https://new.abb.com/grid/ appsil/investors-section
31. Directors and Key Managerial Personnel:
During the period under review, Mr. Sanjeev Sharma, Mr. Sridhar Krishnaswamy Tyagavalli
and Mr. Gururaj Bhujangarao were appointed as the First Directors upon incorporation of
your Company w.e.f. February 19, 2019.
Mr. Achim Michael Braun and Mr. Ismo Antero Haka were appointed as Additional Directors
w.e.f. November 22, 2019. Mr. Venu Nuguri was appointed as Additional Director w.e.f.
December 2, 2019.
Mr. Ajay Singh was appointed as Chief Financial Officer w.e.f. December 02, 2019 and
Mr. Poovanna C. Ammatanda was appointed as General Counsel, Company Secretary and
Compliance Officer w.e.f. December 2, 2019.
Mr. Frank Duggan was appointed as Non-Executive, Non-Independent Director and Chairman
of the Company w.e.f. December 24, 2019. Mr. Mukesh Butani, Ms. Akila Krishnakumar and Ms.
Nishi Vasudeva were appointed as Non-Executive and Independent Directors w.e.f. December
24, 2019.
Mr. Achim Michael Braun and Mr. Ismo Antero Haka resigned as Directors w.e.f. December
16, 2019 due to pre-occupation. Mr. Gururaj Bhujangarao and Mr. Sridhar
Krishnaswamy Tyagavalli resigned as Directors w.e.f. December 24, 2019 due to the
reconstitution of the Board of Directors. Your Directors place on record their sincere
appreciation of the valuable contribution made by them.
The appointment of additional directors of Mr. Frank Duggan, Mr. Mukesh Butani, Ms
Akila Krishnakumar, Ms. Nishi Vasudeva, Mr. Venu Nuguri is proposed to be
regularised by way of postal ballot exercise to be conducted prior to convening
first Annual General Meeting.
The Board of Directors approved the appointment of Mr. Venu Nuguri as Managing
Director w.e.f. December 2, 2019. Consequently, it will be proposed to the Shareholders to
approve the appointment of Mr. Venu Nuguri as Managing Director for a term
of 3 years w.e.f. December 2, 2019 along with other terms and conditions of services
including remuneration by way of postal ballot exercise to be conducted prior to the
convening of first Annual General Meeting.
Apart from aforesaid changes there are no changes in Directors and Key
Managerial Personnel of the Company from end of financial period upto the date of this
report. Details of Directors, Key Managerial Personnel and Composition of various
Committees of the Board are provided in the Corporate Governance Report forming part of
this report.
Mr. Sanjeev Sharma and Mr. Frank Duggan are Directors liable to retire by rotation. In
accordance with the provisions of the Companies Act, 2013 read with Articles of
Association of the Company, Mr. Sanjeev Sharma (DIN: 07362344), Director, is
retiring by rotation at the ensuing Annual General Meeting of the Company, and being
eligible, has offered himself for re-appointment.
Necessary resolution relating to Mr. Sanjeev Sharma, Director, who is seeking
re-appointment as a Director is included in the Notice of Annual General Meeting. The
relevant details of Mr. Sanjeev Sharma is given in the annexure to the Notice of the
Annual General Meeting.
As on December 31, 2019, and as on date, Mr. Venu Nuguri, Managing Director, Mr.
Ajay Singh, Chief Financial Officer, and Mr. Poovanna Ammatanda, General
Counsel, Company Secretary and Compliance Officer are the Key Managerial Personnel of the
Company.
32. De posits:
During the period under review, your Company did not accept any deposit within the
meaning of the provisions of Chapter V – Acceptance of Deposits by Companies of the
Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
33. Share Capital and Debt structure:
Your Company was incorporated with an Authorised share capital of INR 5,00,000/-
divided into 2,50,000 Equity shares of INR 2 each.
Consequent to the Scheme of Arrangement between ABB India Limited (Transferor) and your
Company becoming effective and in consideration of vesting of the Demerged
Undertaking from ABB India Limited to the Company, the authorized share capital stood
increased to INR 10,00,00,000/- divided into 5,00,00,000 equity shares of INR 2/- each
w.e.f. December 9, 2019, your Company has on December 24, 2019, issued and allotted one
fully paid Equity Share of INR 2/- each of the Company for every five fully paid up
equity shares of INR 2/- each held in the Transferor ("Share Entitlement
Ratio") to the shareholders of the Transferor, as on December 23, 2019, ("Record
Date"). Thus 4,23,81,675 Equity Shares of INR 2 each were allotted. Pursuant to the
terms of Scheme and its approval, entire pre-scheme share capital of 50,000 Equity shares
of INR 2/- held by ABB India Limited stood cancelled automatically.
Out of this 4,23,81,675 equity shares, Company allotted 9,266 Equity shares (pursuant
to fractional entitlements of Members of ABB India Limited as per share entitlement ratio)
and the shares have been allotted to ABB Power Products and Systems India Limited
Fractional Shares Trust 2019 which has been constituted specifically to hold the shares on
behalf of the entitled shareholders of fractional shares in accordance with the
Scheme of Arrangement and the same will be sold in the market and the sale proceeds would
be distributed amongst the entitled shareholders.
The Company has received listing approval from BSE Limited ("BSE") and
National Stock Exchange of India
Limited ("NSE") and 4,23,81,675 equity shares of the Company have been listed
and trading commenced w.e.f. March 30, 2020, on BSE & NSE.
Pursuant to a resolution passed by the Shareholders of your Company on November 26,
2019 and subject to the provisions of the Companies Act, 2013 and the Articles of
Association, the Board is authorised to borrow money, as and when required, from,
including without limitation, any bank and/or other financial institution and/or foreign
lender and/or anybody corporate/entities/and/or authorities, either in Rupees or in such
other foreign currencies as may be permitted by law from time to time, as may be deemed
appropriate by the Board for an aggregate amount not exceeding a sum of INR 5,000 crores
for the Company, notwithstanding that money so borrowed together with the monies
already borrowed by the Company, if any (apart from temporary loans obtained from the
Company's bankers in ordinary course of business) may exceed the aggregate of the
paid-up capital of the Company, its free reserves and securities premium.
Pending establishment of banking limits, your Company borrowed from ABB India Limited and
the outstanding loan as on December 31, 2019, payable by your Company was INR 347.62
crores. Subsequently, your Company has repaid the entire amount of loan availed from ABB
India Limited and established banking limits.
There was no issue of preference shares, debenture, warrants or other convertible
securities during the financial period under review. The Company has not issued any shares
with differential voting rights, bonus shares, sweat equity shares, employees stock option
nor bought back any share during the financial period under review. No shares were held in
the trust for the benefit of employees during the financial period under review. Your
Company did not secure any credit rating during the period under review.
There has been no revision of financial statement or report, no change in nature of
business. There was no instance of Statement indicating deviations, if any, in the use of
proceeds from the objects stated in the offer document or explanatory statement to the
notice for the general meeting.
34. Significant and material orders passed by the regulators or courts or tribunals
impacting the going concern status of the Company:
During the period under review, no significant and material orders were passed by the
regulators or courts or tribunals impacting the going concern status of the Company.
With regard to the Demerger, the National Company law Tribunal (NCLT), Bengaluru bench
approved the Scheme of Arrangement (Demerger) vide its order dated November 27, 2019.
With regard to listing process of the Company's equity shares and in terms of the SEBI
circular no. CFD/DIL3/CIR/2017/21 dated March 10, 2017 as amended vide SEBI circular dated
Jan 3, 2018 ("SEBI Circular"), the Company was required to list the equity
shares of the Company with BSE Limited and National Stock Exchange of India Limited within
60 days of the date of the receipt of the order approving the Scheme of Arrangement. SEBI
vide letter dated March 13, 2020 notified to the Company, the delay in compliance with the
SEBI Circular and to ensure compliance in future.
35. Internal financial control systems and their adequacy:
The details on Internal financial control systems and their adequacy are provided in
the Management's Discussion and Analysis which forms part of this Report.
36. Disclosure as per the Sexual Harassment of Women at Work place (Prevention,
Prohibition and Redressal) Act,2013:
The Company has zero tolerance towards sexual harassment at the workplace and has
adopted a policy on prevention, prohibition and redressal of sexual harassment at
workplace in line with the provisions of the Sexual Harassment of Women at Workplace
(Prevention, Prohibition and Redressal) Act, 2013, and the Rules there under w.e.f.
February 28, 2020. As required under law, an Internal Complaints Committee has been
constituted for reporting and conducting inquiry into the complaints made by the victim on
the harassments at the work place. During the period under review, no cases were reported.
37. Statutory Auditors:
Pursuant to provisions of Section 139 of the Act read with the Companies (Audit
and Auditors) Rules, 2014, M/s. B S R & Co. LLP, Chartered Accountants
(Registration No. 101248W/W-100022), were appointed as the first Statutory Auditors of the
Company. Their term expires at the conclusion of First Annual General Meeting of the
Company.
For next term, your Directors have recommended appointment of M/s. S.R. Batliboi &
Associates LLP, Chartered Accountants (Registration No. 101049W/ E300004) as Statutory
Auditors, for a period of five years, to hold office from the conclusion of first Annual
General Meeting until the conclusion of sixth Annual General Meeting at such remuneration
as may be mutually agreed. Consent of members is being sought in the notice convening the
first Annual General Meeting seeking appointment.
38. Cost Audit and Cost Auditor of the Company:
The provisions of Section 148 of the Act read with the Companies (Cost Records and
Audit) Rules, 2014, were applicable to the Company and accordingly the Board of
Directors, on the recommendation of the Audit Committee, appointed Messrs Ashwin
Solanki & Associates, Cost Accountants (Registration No: 100392) as Cost
Auditor of the Company, for the financial period ending December 31, 2019, for
conducting the audit of the cost records maintained by the Company.
The Board of Directors, on the recommendation of the Audit Committee, has appointed
Messrs Ashwin Solanki & Associates, Cost Accountants (Registration No: 100392) as Cost
Auditor of the Company, for the financial year ending December 31, 2020, for
conducting the audit of the cost records maintained by the Company.
A Certificate from Messrs Ashwin Solanki & Associates, Cost Accountants has been
received to the effect that their appointment as Cost Auditor of the Company, if made,
would be in accordance with the limits specified under Section 141 of the Act and Rules
framed thereunder and they are not disqualified to be appointed as Cost Auditor.
39. Listing of the equity shares of the Company:
Your Company received listing and trading approval for 4,23,81,675 Equity Shares of INR
2 each from the BSE Limited ("BSE") and the National Stock Exchange of India
Limited ("NSE") on March 25, 2020. The equity shares of your Company
commenced trading on BSE and NSE from trading hours on March 30, 2020. The Stock Code of
Equity Shares of your company are NSE Symbol: POWERINDIA, BSE Scrip code: 543187
(POWERINDIA) and ISIN: INE07Y701011
40. Shifting of registered office of the Company:
The registered office of your Company has been shifted from 21st Floor, World Trade
Center Brigade Gateway, No. 26/1, Dr. Rajkumar Road, Malleshwaram, Bengaluru - 560055 to
8th Floor, Brigade Opus 70/401, Kodigehalli Main Road, Bengaluru - 560092 w.e.f. March 16,
2020.
41. Management Discussion and Analysis Report (MDAR)
The Management Discussion and Analysis Report (MDAR) is annexed as Annexure A to this
report.
42. Postal ballot
The Company proposes to conduct postal ballot exercise through remote e-voting pursuant
to
Section 110 and other applicable provisions, if any, of the Companies Act, 2013
(the "Act"), read with Rule 22 and other applicable rules of the
Companies (Management and Administration) Rules, 2014 ("Rules") (including any
statutory modifications, amendments or re-enactment thereof for the time being in force)
and General Circular No. 14/2020 dated April 8, 2020, read with General Circular No.
17/2020 dated April 13, 2020, issued by Ministry of Corporate Affairs, Government of India
("MCA Circulars") and pursuant to other applicable laws and regulations MCA
circulars .
43. Acknowledgements:
The Board of Directors take this opportunity to thank the Company's parent
company, customers, members, suppliers, bankers, associates, Central and State Governments
and employees at all levels for their support and co-operation extended to the Company
during the period under review.
For and on behalf of the Board of Directors
For ABB Power Products and Systems India Limited
|
Frank Duggan |
| Place: Bengaluru |
Chairman |
| Date: April 30, 2020 |
DIN: 02937233 |
Annexure - A to Directors' Report
Management discussion and analysis
Industry structure and developments
Economic and market overview
2019 began on a hopeful note. With the new central government being elected on an even
greater majority than in 2014, expectations were high of a policy that would boost
the country's growth momentum. The triple balance sheet problem involving banks,
corporates and non-bank financial intermediaries, triggered by the NBFC defaults in 2018,
kept credit conditions tight.
Despite several rounds of monetary policy easing by the Reserve Bank of India and
stimulus measures from the Government, private investment and core sector output failed to
pick up. With investment low, job creation and jobs-driven consumption recovery remained
missing. By September, stagnation in the manufacturing sector worsened due to weak
spending and outlay. All three major industrial sectors - mining, manufacturing and
electricity shrank. Industrial output too remained weaker-than-expected.
An additional headwind for India was weaker global demand. The Indian Rupee remained
battered due to persistent weakness in the domestic economy, financial sector woes,
volatility in oil prices, as well as trade tensions between the U.S. and China, pushing
investors to seek shelter in U.S. assets. Thus, the currency could do little for exports.
Global trade turbulence and various protectionist measures taken by countries took a toll
on performance.
The year, however, closed with things to look forward to. December's manufacturing PMI
rose to 52.7 from 51.2 in November, showing an uptick in consumer demand and exports1.
The U.S. and China also agreed on a partial trade deal, while domestically the Government
provided a thrust for infrastructure projects and measures to usher credit liquidity in
the system.
Power sector overview
Over the past decade, energy and emission intensities as part of the country's gross
domestic product have decreased by more than 20 percent2. By December 2019, the
country had deployed a total of 84 gigawatt (GW) of grid-connected renewable electricity
capacity, while total generating capacity reached 366 GW.
The Union Budget 2019-20 opened doors to several potential opportunities for the power
sector. It announced the allocation of INR 100 lakh crore for infrastructure over the next
five years3. It also showed commitment to creating a blueprint for gas and
water grids as well as regional airports. To facilitate its 24/7 power for all by 2022, it
also promised the roll out of a new tariff policy for the power sector alongside schemes
to reduce losses of distribution companies (discoms), albeit with more stringent caveats.
For attracting investment for manufacturing and to ensure clean energy over time, it also
allocated INR 10,000 crore for the faster adoption of electric vehicles. The decision to
float a new public sector discom, with pan-India presence, was also realized.
Yet, for most of 2019 the power sector remained under pressure due to power purchase
agreement re-negotiations, demand reduction and mounting dues from discoms to the
generating companies. Electricity consumption growth slowed causing electricity
generation, including from renewables, to stay in second gear. Conventional generation was
down 19 percent in October while overall generation fell 1 percent year-on-year in the
fourth quarter. The cumulative year-to-date production (April-December) from on-grid
coal-fired power generation was also down 25 billion units in absolute terms4.
The rising cost of coal and rail transportation further dampened investor interest in the
thermal sector, having them to continue to pivot toward renewable energy – the lowest
cost source of new power generation. State-center policy issues such as the perplexity of
implementing ‘Make-in-India' also led to the cancellation of more than 4.5 GW of
tenders and the under subscription of another 6 GW of auctions due to scarce investor
interest4.
With such a backdrop, ABB Power Grids retained its focus on solid fundamentals to build
on existing opportunities and make headway in carefully chosen high-growth segments such
as grid automation and rail. Many of these will drive business growth in the years ahead.
Also central to our vision are the United Nations Sustainable Development Goals, notably
Goal 7 for affordable and clean energy.
1 https://in.reuters.com/article/india-economy-pmi/indias-december-
factory-activity-picks-up-to-seven-month-high-but-business-
optimism-weakens-idINKBN1Z106T.
2 https://www.iea.org/reports/india-2020.
3 https://www.firstpost.com/business/infra-budget-2019-rs-100-lakh-
crore-allotted-for-infrastructure-in-next-5-years-projects-to-bridge-
urban-rural-divide-highlighted-6940701.html.
4 Central Electricity Authority
Over the coming decade, technology developments and economic advantages strongly
intertwine with Government's ambition to put India in a position to transform its
electricity sector. The push on adoption of advanced digital technologies such as big data
and artificial intelligence to curb emissions and improve efficiency, including the
digital solutions pioneered by our Company, is projected to continue.
ABB Power Products and Systems India Limited has built a compelling portfolio of
products and solutions that enable increased use of clean energy sources across the focus
sectors of utilities, industries, transportation and infrastructure to drive business
growth and will continue to focus on innovation to bring value to our stakeholders. We are
confident that we have the expertise and footprint to build on the momentum and power
ahead.
Business overview
In 2019, Power Grids demerged from ABB India Limited and became a standalone legal
entity - ABB Power Products and Systems India Limited. We began our march to a new future
backed by the legacy accorded to us by our former patron. With a history of over 130
years, ABB has a proven track record with worldwide installed base, lifecycle support
services and domain expertise. It is known for its commitment to continuous innovation and
development of power technologies. Hence, although young, we are backed with a significant
sectoral experience.
The management of ABB Power Products and Systems India Limited has historically been
associated with the Power Girds business in various roles and brings on board
extensive business experience. Equipped with a thorough understanding of industry trends,
demands and market changes, we are confident of our ability to adapt and diversify
our operating capabilities and take advantage of market opportunities. We are poised to
innovate and create value in the power technologies space and be the partner-of-choice for
enabling a stronger, smarter and greener grid.
As of date, we have five manufacturing locations spread across Gujarat and
Karnataka, a well-entrenched network of 17 sales offices and established customer
relationships. We operate across four business lines, namely, (i) grid automation, (ii)
grid integration, (iii) high-voltage products and (iv) transformers, and provide product,
system, software and service solutions across the entire power value chain. Our offerings
are designed to meet the growing demand for electricity with minimum environmental impact.
We support utility, industry and transport and infrastructure customers to plan, build,
operate and maintain their power infrastructure.
Segment and product-wise reporting
We are engaged in the business relating to products, projects and services for
electricity transmission and related activities. Accordingly, the Company's activities and
business is reviewed regularly by the chief operating decision maker from an overall
business perspective, rather than reviewing its products/services as individual standalone
components. Thus, we have only one operating segment, and have no reportable segment in
accordance with Ind AS- 108 ‘Operating Segments'. ABB Asea Brown Boveri Limited hold
10 percent or more shares in the Company. The details of transactions with promoter/
promoter group holding 10 percent or more shares have been disclosed in the accompanying
financial statements.
Our strategy
We aim to solidify our presence in the power sector and have been putting immense
effort in strengthening its operations. In accordance with our global strategy, we have
prioritized eight high-growth segments, namely, grid automation, FACTS, rail, HVDC, data
centers, software, EV infrastructure and microgrids to drive future growth. We are
well-positioned against our competitors to take advantage and have a leading position in
these attractive markets.
Our strategy is built upon three strategic pillars. First, to become a growth
engine through developing a world-class front-end team and a customer-centric mindset.
Second, to sharpen our winning portfolio and business models by competitiveness and
maximized customer value. And third, to drive for world-class execution by ensuring
industry-leading quality and operational performance. These pillars are anchored to a
foundation of people and innovation. While hiring top talent and building people
capabilities for large projects is a challenge across the power industry, we are sure of
our strengths and are empowered by our agile structure and expected overall market growth.
Our continued focus on R&D positions us well to deliver value to our customers even
in times of transformation. We are constantly working on short-term evolutionary
innovations to existing products and services, as well as long-term innovations crucial
for maintaining and strengthening our position as a leader in innovation and for
supporting future growth. To ensure we are flexible and result-driven, our global research
centers and business units are integrated with leading universities in India and abroad,
and with our other external partners, in a networked environment.
Operational overview
At a time when disruptive technological changes and various policy initiatives are
changing the way customers do business, we have continued to prepare ourself and create
value for our stakeholders through best-in-class manufacturing facilities and global
technology portfolio. Further, our internal transformational initiatives have helped us
build systematic cadence, agility and disciplined performance to transform growth,
portfolio and execution. Our foundation of innovation and people strategy have helped us
stay on track.
At the close of the year, we set up our new headquarters in Bengaluru and
launched ourselves as a standalone legal entity in the power domain. We also
established a world-class digital experience center, PowerDEC, which demonstrates the next
level of enterprise performance for enhanced grid stability, improved asset performance
and efficient operational management.
As part of our investment in strategic research and development programs, we
inaugurated a High-Voltage Products Innovation Center in Vadodara, accredited with the
National Accreditation Board for Testing and Calibration (NABL). The center will reduce
the Company's dependence on external bodies and support the technology and R&D teams
in testing their inventions in real-time, enabling faster go-to-market.
At our Peenya facility we added one shop floor for utility communication. To prepare
ourselves to smartly handle future demand from urbanization, we also set up a factory for
Electric Multiple Unit (EMU) traction transformer at Savli and expanded the capacity of
our power transformers facility in Maneja.
We are committed to maintaining state-of-the-art test facilities and
NABL-accredited high voltage, mechanical endurance labs for testing our manufactured
products to ensure their long-lasting site performance. We are equipped with full-time
training facilities encompassing our complete range of products, systems and communication
and have a rigorous year-long training calendar. Our factories are in the process of
implementing the LEAN Lighthouse program and continue to work on LEAN principles to reduce
waste and increase recycling.
At the close of 2019, ABB Power Products and Systems India Limited was in the process
of being certified under ISO 14001 Environment Management Systems and ISO 45001 Safety
Management System. We aim to be recognized for our customer focus and high standards in
the industry. We plan on achieving it by enhancing the quality of our technology
applications and training our channel partners on the highest operational benchmarks. We
have rolled out company-wide LEAN and Six Sigma (L6S) initiatives and, have until date
trained 327 Yellow Belts, 6 Green Belts and 1 Black Belt.
ISO 9001 – 2015 certified, we have established quality management system with a
clear policy objective and focus on customers, factory processes and suppliers. Regular
TLC audits by the product technology lead centers for control and improvement in
process and product manufacturing across the value chain are carried out.
We have set-up a vendor quality assurance function, followed by regular audits to
monitor and improve supplier performance on quality, delivery and sustainability.
Statistical process control across suppliers and inspection using modern measuring
instruments, such as helium leak testing M/c, 3D CMM are in place for improving incoming
component quality. We also have in-process quality control tests and skill matrix checks
for the flawless production of products.
With close to 100 dedicated engineers, our technology centers focus on continuous
product innovation, optimization and improvement using various state-of-the-art technical
software. The availability of world-class PowerTEC training center to give customers
hands-on training in handling the Company's products also lead to a further improvement in
product lifecycle.
Performance during the reporting period
Keeping pace with the evolving markets, we had many firsts in the period under review.
We booked our first cybersecurity order from Power Grid Corporation of India Limited
(PGCIL), Roorkee. City and state utilities continued their digital transition and we
booked orders for remote terminal units for smart cities and protection, control and
measurement units of Relion for digital substations. Pilots were initiated for
digitalizing transformers using our CoreTec and Core Sense offering with a leading
renewable player. To ensure reliable rural electrification under the Government's rural
electrification program for Deendayal Upadhyaya Gram Jyoti Yojana and Integrated Power
Development Scheme, we delivered COMBIFLEX solutions through our partners. We received
multiple orders toward urban mobility including for the supply of over 80 trackside
transformers for railway electrification and Supervisory Control and Data Acquisition
(SCADA) solutions and dry-type distribution transformers for various metro projects
across India.
With space crunch in urban environments increasingly becoming an issue, we also
received orders for a 132 kilovolt (kV) Gas Insulated Switchgear (GIS) substation
from a state utility, a 400 kV GIS and transformers order for a power plant in
eastern India, a 400 kV GIS for a thermal power plant in a southern state, and a 420 kV
GIS for Bharat Heavy Electricals Limited TANGEDCO Udangudi STPP project, and many
others.
Major orders successfully commissioned/supplied during the period under review include:
• Phasor measurement units to industrial and renewable sectors for substation-wide
area measurement projects.
• One of India's first next-generation fiber-optic transmission equipment, based
on multi-protocol label switching, for 1,400-kilometer (km) oil and gas pipelines for
Pipeline Infrastructure Limited.
• Network Manager SCADA upgrade order for Bangalore Metro Rail Corporation Limited
(BMRCL).
• Automation, control and SCADA order for Pune Metro.
• Automation and control order for Eastern Dedicated Freight Corridor.
Growth in industries such as steel, cement and automobiles, however, continued to
weaken. Solar capacity addition in the country didn't happen as expected and fewer in the
domain were awarded in 2019 than the year before. Our e-balance of system projects were
further hampered by the ambiguity in Goods and Services Tax on solar.
Our track record of excellence and on-time delivery ensured we remained the preferred
suppliers for our existing customers. To name a few, we received repeat orders from PGCIL
for software-as-a-service and power line carrier communication, and from National Thermal
Power Corporation Limited (NTPC) for protection and integrated energy management solution.
Our businesses booked milestone orders including traction transformers,
customized for WAP-7-type electric locomotive for powering Indian Railways under their
‘Mission Electrification'; HVDC upgrade for PGCIL's Rihand Dadri HVDC link; traction
transformers from Diesel Locomotive Works, Varanasi, and Chittaranjan Locomotive Works. We
also received orders for 765 kV transformers and reactors for PGCIL substations as
well as for a 400/220/ 132 kV GIS substation from an infrastructure customer.
Our orders for the period under review - April to December 2019 - totaled INR 2,642
crore, and revenue was INR 3,231 crore. Profit-before-tax was INR 220.6 crore and
profit-after-tax INR 165 crores.
Services
Value-based engagement with customers ensured that we continued the double-digit growth
momentum in service orders. We had multiple orders encompassing transmission, generation,
process industry and metros - areas that hold major growth potential. We received several
third-party upgrade and retrofitting orders and collaborated and co-created digital
solutions with customers to help them drive efficiency and reliability, while improving
safety. To that effect, we received a large service order from PGCIL for Rihand-Dadri HVDC
system upgrade, recovery and restoration of TCSC-II at Raipur Substation, lifecycle
service orders for grid automation from Delhi Metro Rail Corporation, Vedanta, NTPCL and
PGCIL, a retrofit order from Druk Green Power Corporation Limited, Bhutan, for circuit
breakers and disconnectors, a replacement project order for 76 units of 245 kV
disconnectors from Gujarat State Electricity Corporation Limited (GSECL), an annual
maintenance contract for 220/33 kV substation from BPCL Kochi, and power system study
orders from various customers.
We remained a trusted partner for training top talent and had such requests from
PGCIL, Gujarat Energy Transmission Corporation Limited and Maharashtra State Electricity
Transmission Company Limited. We also had a Memorandum of Understanding (MoU) with
Central Board of Irrigation and Power under which we conducted workshops for more than 200
customers from over 20 utilities. We devoted efforts toward developing future
talent for our high-growth segments and ran more than 60 separate training programs for
over thousand people, recording about 3,500 man-days. We conducted a one-day finishing
school on e-vehicles and digital substations for more than a hundred undergraduate
students.
During the period under review, key customers including energy and steel majors,
recognized ABB Power Products and Systems India Limited for its service commitment.
Customers such Tata Steel, GSECL and North Eastern Electric Power Corporation Limited
extended their service engagement.
Exports
Our consistent focus on performance and assurance of on-time delivery, ability
to optimize without any compromise on quality and world-class facilities, helped retain
the drive in our export orders in 2019. Despite global trade rigidities, they contributed
in double-digits to our total orders. Opportunities arose from South Africa,
Indonesia, Vietnam, Sweden, Chile, Uruguay, the U.S., and Australia. These countries made
up three-fifth of our total exports in 2019.
Among many others, we had:
• Our single-largest order booked for transformers from a customer in Africa for 7
x 150 mega volt amp (MVA) 400 kV, 1 Ph, auto transformers and 2 x 120 MVA 245 kV power
transformers for a hydro power project.
• Our first direct order from a Latin American utility for 30 of our 170 kV
circuit breakers.
• Breakthrough order for power transformers from a Chilean utility.
• Orders for power transformers from UTE, Uruguay.
• Order for dry transformer for a data center in South Africa.
• Breakthrough order for Network Manager - SCADA for an airport in Middle East.
• Protection and control equipment order from global feeder factory for customers
such as Ontario Power Generation (the U.S./Canada) and Transgrid (Australia).
• Largest order received for the supply of 72.5 kV to 245 kV circuit
breakers to customer in Chile, and first breakthrough order for 245 kV circuit breakers in
the same market.
• Entry in Angola with our circuit breakers, current voltage transformer and power
transformers.
• Supply of over 4,000 COMBIFLEX relays across the world.
• A five-year frame agreement for supplying 72.5 kV EDI circuit breakers in
Denmark.
• The first order for the 245 kV vertical break disconnector from the U.S.
• Largest quantity of 72.5 kV Poles & Power Packs received from Spain - 220
units.
• Largest order-booking from Indonesia with maximum penetration through local
footprint for circuit breaker, disconnectors and instrument transformer.
Operational excellence
We are deeply devoted to expanding the Indian power market. We have been investing in
expanding our manufacturing base in the country for over six decades and today our
world-class facilities are the single point source for Power Grids' global supply of
several products. Growth is difficult in isolation. So we continue to invest across the
entire value chain - from customers to suppliers, from employees to future talent. With
local manufacturing, engineering and delivery of almost the entire global portfolio of
products and solutions, India is a microcosm of the global Power Grids business. It also
supports global R&D, engineering and business services.
On a transformative journey, ABB Power Products and Systems India Limited is adopting
strategies for profitable growth, relentless execution and business-led collaboration. To
support customers in a world of unprecedented technological change and digitalization, it
aims to focus, simplify and shape the business to solidify its market position. As
the energy landscape evolves, we are actively evaluating how best to cater to the changing
needs, testing everything from assembly, partial manufacturing to running pilots or
forming partnerships to leveraging the expertise of specialists.
Initiatives
We have made significant improvements through our internal transformation program,
where we made change and growth our core mantra to provide value for customers. We
are well-positioned for long-term success. We have developed eco-efficient GIS and circuit
breakers and in the e-mobility space, started a pilot for TOSA flash-charging solution
with Ashok Leyland to test the feasibility of our product in the Indian market.
Despite difficult market conditions, we have been able to strengthen our world-class
front-end transformation workstream to enhance our capability to deliver products,
systems, software and services through superior and optimized internal processes. To
address the changing needs of the Indian market, we have simplified and primed our
sales organization to penetrate the market further for a larger share, while nurturing
talent to remain current and relevant to customer needs.
Continuous competence growth being a crucial element in the success of our sales force,
the team has put in over 1,400 hours of training on pertinent subjects ranging from
technical and commercial expertise to behavioral and change management. Dashboards and
tools for analysis of market and opportunity pipeline have been developed to support sales
force's daily operations and improve decision-making processes.
Our multi-functional, cross-business line teams came together in collaborated sales
efforts with well-governed processes to secure deals with clear value proposition to
our customers. These specialized teams, with their strategic approach, have helped
us win orders of GIS substations, electrical balance of plant for renewable
projects, and others, in a highly competitive environment.
With our agenda to grow our business profitably and sustainably, we are focused on
increasing our market and competitiveness by analyzing white spaces in our key segments.
Through the year, we have taken extensive actions to leverage our installed base, evaluate
local market needs for potential new product development and customizations and
engage early on with stakeholders for prioritized market opportunities to maximize
our win probabilities. Through these actions, we identified an additional market potential
of approximately INR 1,582.84 crores* in segments such as transmission,
distribution, rail & urban transport, renewables, industries, data centers, and more.
Research and Development (R&D)
We believe that the development of new products, features and solutions and
their localization secures as well as creates additional revenues with increased number of
customer engagements and installed bases. R&D in application of alternative material,
design optimization, engineering tools, manufacturing technologies, quality improvement
techniques/tools and value engineering have helped us safeguard and improve profitability.
As part of our industry and social innovation engagement, we have been participating in
various R&D related activities in association with industry bodies, professional
technical groups, forums and policy makers, and have received awards and recognitions in
terms of application of innovation, technical publications and presentations. Our
* Based on 2020 MUSD BUDG RATE: 1 USD = 68.819 INR
R&D activities are carried out in the global R&D and technology centers as well
as in the local businesses. We believe that this leverages our presence and competencies
in India to develop new technologies and adapting existing ones for Indian and export
market and business.
Talent
Our investment in training and upskilling employees continues to set us apart in the
market. Our success rests on getting and retaining the right talent. Thus, we have in
place various management training programs tailored for different management segments.
These programs have been instrumental in penetrating and expanding the market presence and
in introducing key technologies. As of date, our employee base stands at 2,200. As
we continue to grow, we will invest in talent in the segments that are vital for our
business growth.
Collaboration
We are in regular interaction with Government utilities and policy bodies, industrial
forums such as IEEMA, CII, ISGF and technological forums like CIGRE to introduce products
and solutions and to shape policy towards a stronger, smarter and greener grid. We have
entered into an MoU with a leading academic institute to set-up an operational smart
electricity distribution network and management system in its campus, aimed at serving as
a pilot project for the Smart Cities Mission of the Government of India. We also had
an MoU with the Central Board of Irrigation and Power under which we conducted
workshops for more than 200 customers from over 20 utilities.
Human resources
We believe that people are the key pillar of our Company's success in the market. We
continue to attract the best of talent thanks to our inclusive culture and ability to
leverage new and existing opportunities for their career growth. Our people strategy is
aligned with our overall vision to be the pioneer in shaping the future of sustainable
energy and we are committed to nurturing a cordial and diversified work environment in a
growing market and in maximizing the potential of our workforce.
As of December 31, 2019, our employee base stood at 2,200. To ensure we continue to
attract top talent, we have launched multiple employer branding initiatives and
consistently created avenues for learning. We are invested in the growth of our employees
and are devoted to helping them adapt and perform better in a fast-changing market
environment. With our enhanced performance management and talent strategy, we focus on
attracting, assessing and developing our human capital for today and for the future. We
pay immense attention to inculcating a learning environment within teams and
providing opportunities for global mobility, so as to manage talent in key function areas.
Our Company's competency model – value pairs – has been aligned with the
business strategy. The same language is spoken throughout employee's performance, learning
and development cycles. To ensure continuous engagement of employees, we have launched
several retention strategies including rewards and recognition programs to create a
nurturing and performance-oriented work place and shape employee behaviors in line with
organizational values.
We believe in creating a work culture that cares for employee well-being. Health and
safety are our number-one priority and throughout the period under review, we have striven
to ensure a safe working environment in all our premises, undertaking several wellness
initiatives. We also paid attention to the governance of various processes and initiatives
across the organization and ensured industrial relations remained cordial and harmonious
across all manufacturing locations.
Finance
Multiple interest rate cuts by the Reserve Bank of India did little to boost
liquidity in the market. Credit conditions remained tight. Initiatives like UDAY
1.0 fell short of bringing fresh investments in the power sector. In this
environment, our Company continued its credible performance through relentless
execution and business-led collaboration. We generated revenue of INR 3,231 crores
while our net profit was more than INR 165 crores.
Our current ratio stood at 1.07 and interest coverage ratio at 10.91, showing strength
in our balance sheet and our ability to maximize capital. Our debtor turnover ratio was
2.02, indicating our robust collection processes. However, we are also discussing
potential repayment mechanisms to clear historical overdues.
Inventory turnover stood at 6.71 percent. Our operating EBITA was 9.0 percent, while
net profit margin stood at 5.1 percent.
In 2019, the interest cost borne by us was INR 26.4 crore. As on December 31, we had a
net cash balance of INR 188 crore. In terms of foreign currency exposure – for
imports and exports – we continued to conservatively hedge at the point of commitment
to protect the contract margins.
| Key financial ratios |
|
| Debtors Turnover |
2.0 |
| Inventory Turnover |
6.7 |
| Interest Coverage Ratio |
10.9 |
| Current Ratio |
1.1 |
| Debt Equity Ratio |
NA* |
| Operating Profit Margin (%) |
10.4 |
| Operating EBITA (%) |
9.0 |
| Net Profit Margin (%) |
5.1 |
| Details of any change in return on net worth as compared to immediate previous
financial year along with a detailed explanation thereof |
NA** |
*Not applicable as we have short-term borrowing only in books
**Not applicable since the Company was incorporated on February 19, 2019, previous year
figures are not applicable.
Note: This being the first financial year of the Company, comparision with previous
year ratios are not applicable.
Disclosure of accounting treatment: The Company followed IND-AS and has detailed
its accounting policy in note 2 of the financial statements.
Risk management, risks and concerns
Risk is inherent in business. ABB Power Grids is well-supported by robust risk
management and governance mechanisms.
We have a risk management charter and policy, which provides an overarching
framework for risk management (RM).
The key elements of our Company's framework have been captured in the RM policy
that details the process for identifying, escalating, prioritizing, mitigating and
monitoring key risk events and action plans. The assessment of risks covers areas of
strategy, technology, finance, operations and systems, legal & regulatory and human
resources risks. There are appropriate assurance and monitoring mechanisms in place to
monitor the effectiveness of our RM framework, including the mitigation plans identified
by management for key risks. We undertake risk management exercises to identify
and expand our knowledge of potential risks in a changing market and handle them.
Our existing framework provides for risk reviews at various levels based on the
organizational structure matrix. Periodic assessment of risks, potential impact relating
to business growth, profitability, talent engagement, and market position are conducted.
Response to key operational risks, based on inputs received from the internal and external
assessment, internal and performance review among others are done on a regular basis.
Our aim is to minimize adverse impacts, leverage market opportunities effectively and
efficiently, and enhance our business competitiveness.
Internal control systems and their adequacy
ABB Power Grids has robust internal financial control systems that are designed to
ensure compliance with all applicable laws and regulations, facilitate optimum utilization
of resources, protect company assets and stakeholders' interests. We are continuously
working on making these systems more efficient and reliable to ensure completeness of
accounting records and timely preparation of financial statements and management
information.
We have a holistic Internal Control (IC) framework comprising Country Management
Committee, Group Directives and Instructions, Local Management Instructions, Process and
Entity-Level Controls, Enterprise Risk Management, Local Direct Management Testing
Programs, and a strong emphasis on integrity and ethics as part of our work culture. An
independent service provider, having expertise in the field, has performed current year's
Internal Financial Control effectiveness testing. We have an efficient Statutory &
Legal Compliance System in place.
We also have a well-functioning whistle-blower policy to report any misdoing. Our IC
framework has been aligned with one of the most matured IC frameworks – COSO 1992 and
transitioned to COSO 2013. The current framework is also in line with the Internal Finance
Control (IFC) requirement of The Companies Act, 2013.
Outlook
The power grids market is driven by an increasing adoption of renewable energy, rising
demand in emerging countries with minimum environmental impact, the expansion of
distributed power sources such as electric vehicles and storage batteries, deregulation of
the electric power sector in countries and regions, and advances in electric power system
reform.
Further, digitalization in power assets, systems and processes is creating the
environment of energy internet with real-time integrated grid control system and asset
performance management with predictive maintenance technologies. Our Company is
continuously developing new features, products and solutions based on core power
technologies to support this evolution.
As per the National Electricity Plan II, 2019, issued by the Ministry of Power,
Government of India ("Electricity Plan"), installed generation capacity in India
will increase from around 350 GW currently to 484 GW at the end of 2021-2022.
Gas-insulated switchgear, hybrid switchgear, digital substations and reactive power
compensation are the technologies of choice to ensure smooth and trouble-free operation of
power systems. Growth in demand and addition of grid-connected solar power are expected to
lead to investments in associated transmission equipment.
Industry growth being largely muted in 2019, we are looking to play an active role in
railway electrification with 27,000 kilometres yet to be electrified by 2023, in
regional transport ventures such as NCRTC (Delhi – Meerut) and high-speed rail
(Ahmedabad – Mumbai), and in metro projects that are either under execution or in a
planning. Data centers hold vast untapped potential for us in India. With the Government
expected to roll out a data center policy soon, we will likely see exponential growth and
areas to pitch our products and services for segment augmentation and business growth. We
are also awaiting further developments in the e-mobility space which is at a nascent stage
in the country right now. With many cities coming up with a Bus Rapid Transit System,
there is an opportunity area which can go electric. At the get-go, we are well-placed to
support the segment with our award-winning innovative flash charging system -TOSA.
As leaders in HVDC technology, we are currently executing the Raigarh-Pugalur HVDC
project and see opportunities for upgrades of maturing HVDC stations in the coming years.
We are also seeing investments starting to happen toward port upgradation i.e., deployment
of smart port infrastructure and shore-to-ship power systems. This is an encouraging
development and we are well-positioned to take advantage of it with our offerings.
The Government's Power-for-All scheme to achieve universal access to electricity by the
early 2020s will be a big demand generator. But in that context, the
Government's focus should be primarily on improving access of energy to households
at affordable rates – a theme central to the policy design. There are multiple
policy and fiscal interventions needed; programs like UDAY need monitoring and
proactive corrections to be effective. A move to pre-paid smart meters, as outlined in
Budget 2020-21, will be a step toward discoms cutting distribution losses and setting the
stage for separating the carriage and content operations. Smart meters minimize human
intervention in metering, billing and collection, and help reduce theft by identifying
loss pockets.
Several renewable technologies such as offshore wind, battery storage, charging
infrastructure for electric vehicles and the like are still to take off in a big way. The
higher technology cost is one of the biggest hurdles for mass adoption. The Government is
considering schemes to remove those hurdles. Fiscal support in the form of viability gap
funding for each emerging technology is under consideration. It is worthwhile to mention
that the ecosystem for such technologies (primarily components) will initially be
imported. Thus import duty and GST on key components need to be initially pegged at
minimal tax slabs.
Opportunities and threats
For 2020, unexpected turn of events has impacted our market outlook. While various
macro parameters had been putting a downward pressure on economic growth, the Coronavirus
outbreak has pushed many projects and orders to the backseat. However, Government spending
in infrastructure and efforts to boost credit liquidity will provide a mild thrust for
industry capex. As normalcy is restored, renewables and rail will continue to be areas of
robust growth, while the data center and e-mobility markets will unleash opportunities for
new business models and overall sector growth. More clarity and policy impetus from the
Government will help to speed up investments. However, we expect prices to remain under
pressure due to competition and the desire of Government for a lower price discovery in
rail and solar projects.
In all this, we are confident that we have the expertise and footprint to build on the
momentum and power ahead.
Cautionary statement
Certain statements made in the Management Discussion and Analysis Report relating to
the Company's objectives, projections, outlook, expectations, estimates and others may
constitute ‘forward looking statements' within the meaning of applicable laws and
regulations. Actual results may differ from such expectations whether expressed or
implied. Several factors could make significant difference to the Company's Operations.
These include climatic and economic conditions affecting demand and supply, government
regulations, taxation, and natural calamities over which the Company does not have any
direct control.
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