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HPL Electric & Power Ltd.

BSE:540136  |  NSE:HPLEQ  |  58888:  |  IND:Electronics/Electricals  |  ISIN code:INE495S01016  |  SECT:Consumer Durables

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You can view the entire text of Chairman's speech of HPL Electric & Power Ltd.
Director Report
Mar 2018

Dear Shareholders,

We stand at the cusp of dynamic transformation of India''s infrastructure; against this backdrop, we successfully leveraged our robust foundation to deliver improved results across most of our business segments. It is my privilege and pleasure to take you through this performance as well as the other highlights of the year and the way forward, as I present the 26th Annual Report of your Company.

In India, the first half of fiscal 2018 was marked by the adjustment to the Goods and Services Tax (GST), arguably the biggest and most decisive tax reform in the country post-Independence. The GST is a welcome measure as from the longer term perspective as it leads to greater formalisation of the economy and eliminates the cascading effect of diverse taxes. While this reform moderated economic growth in the first half of the year, with stabilisation of the GST, the economy bounced back in the second half to reclaim its position as the fastest growing major economy in the world.

The implementation of GST disrupted demand in our trade business in the first half of the fiscal. Channel partners opted for pre-GST inventory destocking due to lack of clarity and uncertainty over availability of input tax credit. Restocking by channel partners took time till the teething issues of the new tax regime were largely resolved. Post stabilisation of trade channels, our trade business displayed healthy growth. Switchgear, lighting and wires & cables revenues went up 58%, 32% and 26% respectively in the second half of the year compared to the first half, underlining the strong recovery. On a year-on-year basis, switchgear business grew by 12%. While the lighting segment de-grew by 17% due to higher phase of a large bulk LED order in 2017 and also due to phase out of CFL lighting, we remain enthused by the strong traction displayed by the LED trade business. The wires and cables segment also remained stable during the year driven by speciality cable orders.

Our biggest achievement for the year was the impressive revival in our metering business. Successful bids for the right contracts and its efficient execution resulted in metering business growing by 14% on a year-on-basis. More importantly, as on May 31, 2018, we have a robust order book of Rs. 477.6 crore, providing strong revenue visibility over the coming year.

Gaining momentum across all our business verticals in the second half of the fiscal, we achieved steady growth in overall revenues. Total revenues for the year (net of excise) stood at Rs. 1,036 crore as against Rs. 986 crore in the previous year, an increase of 5.1%.

Our margins were, however, impacted due to unprecedented increase in the raw material prices. Our recent tenders reflect the raw material price increase and thus we are now better placed to protect our margins.

We would like to mention that our channel financing scheme has shown good progress and the benefits are visible at the operational level. We are also committed to improve the quality of our dealer network by bringing on board, dealers with clean financial records and those focussed on product redistribution.

This will ensure fiscal discipline as well as boost our B2C business.

Another important pillar for driving our B2C business is our conscious investment in brand building. We firmly believe that our brand is a tremendous asset which can help us to enhance our realisations and also our margins. Our advertising and marketing spend increased by almost 50% on a year-on-year basis. HPL was one of the sponsor to the Royal Challengers Bangalore cricket team of the Indian Premier League (IPL). While cricket enjoys huge viewership across the country, our association has led to strong brand visibility and recall.

We are delighted to share that our smart meters received the BIS certification, making HPL among the select few companies in India to be recognised with this qualification. This milestone enhances our status as a technologically advanced meter supplier and gives us an edge by way of pre-qualification in the smart metering opportunity. On the back of the Government''s focus on smart grids and smart cities, the market for smart meters is tipped to grow exponentially; with our new certification, we are confident of ushering in promising prospects.

In another landmark achievement, we completed the installation of smart lighting solutions in Bhopal in accordance with the Smart Cities initiative undertaken by the Government. Among the 100 shortlisted smart cities, Bhopal is the first to have completed the project of smart lighting. We are proud to partner the Government in their efforts to build a New India. At the same time, the experience we have gained will prove valuable in our future endeavours.

The next energy revolution is upon us: clean energy is here to stay. At HPL, building on our culture of innovation, we have developed a complete range of solar energy solutions. The product diversification will enable us to embrace a brighter tomorrow for all our stakeholders. This innovation is the outcome of sustained thrust on research and development. We continue to focus on developing new products incorporating solar technology and making the existing product line flexible enough to cater to and accommodate the various specifications of our end customers in India and the International Market.

We finished 2018 on a strong note despite a sluggish start. We are now poised for moving to an even higher growth trajectory. Our positivity has strong roots. As India seeks to provide more affordable, more accessible, reliable and sustainable power to all its people, Government projects such as Saubhagya, Integrated Power Development Scheme (IPDS) and Deen Dayal Upadhyaya Gram Jyoti Yojana (DDUGJ) should gain vigour. All of them have a meter requirement which improves the prospects for our metering business. In addition, initiatives such as ''Housing for All, Smart Cities Mission, 4G installation in the telecom sector augur well for our different verticals. Switchgear and lighting segments continue to be largely been driven by robust sales in trade business while the wires & cables segment is set to see strong traction driven by trade & speciality cables orders.

All the opportunities aside, we understand, of course, that you would like us to shed light on our internal workings. Here is what you can expect from HPL in the months ahead: strong execution in our metering business; increased focus on controlling costs, driving procurement efficiency and maintaining working capital requirements at existing levels while ensuring healthy sales growth, further strengthening our balance sheet; and continued management efforts to drive double digit revenue growth across all verticals.

In closing, I would like to acknowledge the efforts and commitment shown by our people. Their collective experience and expertise keeps us on top of our game. I am also thankful to our stakeholders, including Central and State government bodies, customers, bankers, investors, creditors and dealers, for reposing their trust in our vision and strategies. HPL remains committed to a future of continuous growth. Thank you for joining us on the journey; we aim to make it a rewarding one.

Sincerely,

Lalit Seth

Chairman and Managing Director

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