Elecon Engineering: Annual Report 2023 Summary
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About the company:
Elecon Group was founded in the year 1951 in Goregaon, Mumbai by Late Mr. Ishwarbhai B. Patel. Initially, the Company manufactured conveyor systems with a focus on Engineering, Procurement and Construction projects in India.
With expertise of over six decades, the company has successfully established its position as Asia’s largest gear manufacturing company, directed by its global presence in Asia, US, UK and Europe.
Within the last decade, the Gear Division has doubled its manufacturing capacity.
The Engineering Sector and Gears:
The Indian Engineering sector witnessed positive growth momentum on the back of increased government spending in core segments such as power, railways and infrastructure development as well as private sector investments in cement, steel, etc.
Capacity creation in the manufacturing sector along with technological improvement in manufacturing processes, diversification by global players away from China and supportive regulatory policies such as PLI bodes well for the growth of the industry.
However, the industry faced challenges in the form of higher commodity and fuel costs on the back of the Russia-Ukraine conflict which disrupted the supply chain.
Rising interest rates and concerns related to inflation and economic uncertainty could act as headwinds to growth prospects for the sector.
There has been a significant shift in the share of industrial exports from developed nations to low-cost base countries like India over the last few years and the trend is expected to continue going forward.
The market is benefitting from increasing investment in renewable power generation, especially wind power, for addressing increasing energy needs and reducing reliance on fossil fuel-based power.
Company Overview 2022-2023:
The gears business witnessed strong demand from end-user industries like cement, steel, sugar, power, etc.
The MHE business saw a remarkable turnaround with consistent improvement in performance due to strategic initiatives and is expected to keep up the positive momentum going forward.
Relentless focus on bringing down receivables has led to a decline in working capital days and all the legacy projects have been cleared and settled.
The company has now become net debt free at the consolidated level.
Elecon is actively engaging with leading OEMs and working towards becoming the preferred supplier in the European market.
The Company has set an ambitious target to take its overseas and export revenue to 50% of the consolidated revenue by FY30.
The company is exploring opportunities in the defence space and is currently the only customized and complex Gear Manufacturer for Defence for the Indian Navy in India.
Orders in Hand as on 31st March 2023:
Recent Achievements:
Elecon managed to complete the Coal Handling Plant at NTPC Mouda by overcoming various problems.
They have successfully completed a 100% indigenous Urea bagging plant at RFCL, Ramagundam.
They have executed the order for a wagon tippler with associated equipment for the third time consecutively from Paradip Port Authority by replacing the old tippler.
They have successfully commissioned 2 sets of Wagon Tippler for M/s. BHEL at Wanakbori TPS, GSECL, Gujarat.
They are about to close the order from Singareni Collieries for Relocatable conveyors for their mines located in the Ramagundam area. No load trails of the conveyors are successfully achieved and about to commission with load in Q1 of FY23-24.
They have successfully completed an order from SAIL Durgapur for Barrel Reclaimer for their Plant.
They have also received the order from SAIL Burnpur for a similar Barrel Reclaimer in FY 22-23. The supply & installation is completed and the machine is likely to be commissioned in Q1 of FY23-24.
They have successfully completed the orders from Shree Cement for Jharkhand & Maharashtra plants and the Wagon Tipplers with associate marshalling equipment are commissioned.
Risks:
The company could be susceptible to strategy, innovation and business or product portfolio-related risks if there is any significant and unfavourable shift in industry trends, customer preferences or returns on R&D investments. Elecon does have the benefit of being very well entrenched with many of its customers, involved in their critical and strategic initiatives. Therefore, client concentration-related risks are mitigated to an extent.
Risks emanating from changes in the global markets such as the recent financial meltdown, regulatory or political changes and alterations in the competitive landscape could affect the Company’s operations and outlook. Any adverse movements in economic cycles in the company’s target markets and volatility in foreign currency exchange rates could have a negative impact on the Company’s performance. This risk is mitigated to some extent due to the Company’s presence in multiple and diverse markets. The Company also takes necessary steps such as forex hedging to mitigate exchange rate risks.
Elecon operates in a highly competitive industry, replete with multiple competitors, in both India and abroad. Shifts in clients’ and prospective clients’ dispositions could affect its business. While the Company has strong domain expertise, robust delivery capabilities and significant project experience, there is no guarantee that it will always get the better of the competition.
The Company’s operating performance is subject to risks associated with factors that may be beyond its control, such as the termination or modification of contracts and non-fulfilment of contractual obligations by clients due to their own financial difficulties or changed priorities or other reasons. Elecon does have mechanisms in place to try and prevent such situations as well as taking insurance cover as necessary.
Management:
Chairman and Managing Director:
Prayasvin B. Patel has 48 years of experience in the engineering industry. He started his career as Sales Director of Prayas Casting Pvt. Ltd, Vallabh Vidyanagar. Thereafter, he joined Elecon Engineering Co. Ltd. as Joint Managing Director on 1st July 1983.
From 1st July 1993, he has taken over the responsibility of the Managing Director of the Company, and in the year 2006 took charge of the overall responsibilities of Elecon Group of Industries as the Chairman and Managing Director.
Prayasvin Patel also holds top positions in many other companies. He is Director in companies like Eimco Elecon (India) Ltd, Power Build Pvt. Ltd, Prayas Engineering Ltd., Emtici Engineering Ltd, Elecon Information Technology Ltd, Elecon Peripherals Ltd, Eimco Elecon Electricals Ltd, Elecon Hydraulics Pvt. Ltd, Madhubhan Resort and Spa (a resort) amongst other small organizations. He also handles the responsibilities of Charotar Vidya Mandal (CVM) as the President.
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