VA TECH WABAG LIMITED
ANNUAL REPORT 2011-2012
DIRECTOR`S REPORT
Directors` Report
Your Directors are pleased to present the 17th Annual Report and the
audited accounts for the financial year ended March 31, 2012
Financial Results
The financial performance of the Company, for the year ended March 31, 2012
is summarized below:
(Rs. in Lakhs)
Standalone Consolidated
2011-12 2010-11 2011-12 2010-11
Gross Turnover 1,00,347 73,346 1,44,352 1,24,182
Profit before Interest
& Depn. (EBITDA) 11,542 8,931 13,004 12,103
Profit Before Taxation 11,002 8,379 11,105 9,627
Provision for Tax 3,490 2,853 3,792 3,161
Profit After Taxation
(PAT) 7,512 5,526 7,375 5,257
Proposed Dividend
(including dividend tax) (1,844) (1,232) (1,844) (1,232)
Transfer to General
Reserve (751) (553) (751) (553)
Profit/(Loss) brought
forward 14,270 10,529 16,794 13,321
Retained Profit carried
forward to the following
year 19,187 14,270 21,567 16,794
Dividend
Based on the Company`s Performance, your Directors are pleased to recommend
a dividend of Rs. 6 per Equity Share (300%) of the face value of Rs. 2 per
Equity Share for the financial year 2011-12. The dividend, if approved by
the members at the forthcoming Annual General Meeting, will be paid to
members whose names appear in the register of members of the Company as on
July 13, 2012; in respect of shares held in dematerialized form, it will be
paid to members whose names are furnished by National Security Depository
Limited and Central Depository Services (India) Limited, as beneficial
owners as on that date. The equity dividend outgo for the financial year
2011-12, inclusive of tax on distributed profits will absorb a sum of
Rs.18.44 crores.
Business Performance
In the financial year 2011-12, your Company continued its strong growth
momentum. For the first time in the Company`s history, your Company`s
Standalone turnover crossed Rs. 1000 crores, an increase of 36.81% over
last year`s turnover. The consolidated turnover stood at Rs. 1443.5 Crores
compared to previous year`s Rs. 1241.8 Crores, recording a growth of 16.24%
over last year. The EBITDA for the year on a Standalone basis stood at
Rs.115.4 Crores registering a growth of 29.24% as against previous year`s
Rs. 89.3 Crores. The Consolidated EBITDA increased 7.44% from Rs. 121
Crores of previous year to Rs. 130 Crores for the Current year. Your
Company recorded a healthy growth in both Consolidated and Standalone PAT%
as compared to Last Year. The Consolidated PAT recorded a 40% growth over
the previous year while the Standalone PAT recorded a 36% increase over the
previous year. Your Company has an order back log of over Rs. 3700 Crores
as on March 31, 2012. EPS growth recorded a 31% increase for the year ended
March 31, 2012. The Company continues the "Asset Light" business model and
forayed into two new BOOT projects during the year. Your Company is
restructuring its strategic business units to align them to the respective
business lines and generate higher revenue. Your Company will continue to
focus on both organic and inorganic growth model through strategic
acquisitions that will pave way for entry into various new business
segments across geographies and utilize internal accruals to meet short-
term working capital requirements.
Sustainability
Sustainability governs the business operations. Your Company focuses on low
carbon emission and sustains the use of water and energy in its plant
construction to benefit the customers. Your Company has implemented various
innovative sustainable initiatives in business operations. This not only
facilitates business gains but also facilitates environmental benefits
through recycling and reuse of water; converting waste gas into electricity
to run treatment plants on a self-sustainable basis and converting waste
water into direct potable use.
Awards and recognitions
Your Company was conferred with the Export Excellence award from EEPC India
for its contribution to engineering exports during 2009-10. The coveted
award was presented by the Governor of Tamil Nadu on December 06, 2011.
Your Company received the National Award for Excellence in Water Management
for the year 2011 by Confederation of Indian Industry (CII) for the
valuable contribution made in efficient water management. Your Company also
bagged the KPMG -Infrastructure Today Award for the Aurangabad Water Supply
Project on December 09, 2011, which was adjudged as the PPP project of the
year.
Sub-division of shares
With a view to improve the liquidity of your Company`s shares in the stock
markets and make it more affordable for small retail investors, the face
value of each equity share of your Company was sub-divided from Rs. 5 to
Rs. 2 per equity share with effect from August 18, 2011.
Stock Options
In order to attract, retain, reward and motivate employees to contribute
and participate in the Company`s growth and profitability, your Company
implemented two stock option schemes viz., the ESOP Scheme 2006 and the
ESOP Scheme 2010 ("the Schemes") in accordance with the Securities and
Exchange Board of India (Employees Stock Option Scheme and Employee Stock
Purchase Scheme) Guidelines, 1999 (`the SEBI Guidelines`). The schemes are
administered in accordance with the directions of the Remuneration
Committee of the Board. The applicable disclosures as stipulated under the
SEBI Guidelines as at March 31, 2012 are provided in Annexure I to this
Report.
The Company has received a certificate from its Auditors that the Schemes
have been implemented in accordance with the SEBI Guidelines and the
resolution passed by the shareholders. The Certificate would be placed at
the Annual General Meeting for inspection by members.
Management Discussion and Analysis Report
Management`s Discussion and Analysis Report for the year under review is
presented in a separate section forming part of the Annual Report.
Subsidiaries
Your Company had Fifteen Subsidiaries at the beginning of the year. Three
new subsidiaries were set up during the year viz.,
1. VA Tech Wabag (Philippiness), Inc.
2. VA Tech Wabag Muscat LLC.
3. Ujams Wastewater Treatment Company (Pty) Ltd.
The total number of Subsidiaries as on March 31, 2012 is eighteen. The
Company has commenced the liquidation process for its subsidiary in Dubai.
There has been no material change in the nature of the business of the
Subsidiaries.
In accordance with the general circular issued by the Ministry of Corporate
Affairs, Government of India, the Balance Sheet, Profit & Loss Account and
other documents of the subsidiary companies are not being attached with the
Balance Sheet of the Company. However, the financial information of the
subsidiary companies is disclosed in the Annual Report in compliance with
the said circular. The Company will make available the Annual Accounts of
the subsidiary companies and the related detailed information to any member
of the Company who may be interested in obtaining the same. The annual
accounts of the subsidiary companies will also be kept open for inspection
at the Registered Office of the Company and that of the respective
subsidiary companies. The Consolidated Financial Statements presented by
the Company includes the financial results of its subsidiary companies.
Details of major subsidiaries of the Company are covered in the
Management`s Discussion and Analysis Report forming part of the Annual
Report.
Directors
Dr. Guenter Heisler and Mr. Sumit Chandwani, Directors retire by rotation
at the ensuing Annual General Meeting. Being eligible Mr. Sumit Chandwani
offers himself for re-appointment. Dr. Guenter Heisler has conveyed his
decision, not to seek re-appointment. The Board wishes to place on record
its appreciation for the valuable guidance extended and the contribution
made by him during his association with the Company. Members` attention is
drawn to the corresponding resolution and the explanatory statement
thereto, in the Notice dated May 24, 2012 convening the Annual General
Meeting.
Ms. Revathi Kasturi was appointed as an Additional Director of the Company
on February 09, 2012 by the Board of Directors. As per the provisions of
Section 260 of the Companies Act, 1956 Ms. Revathi Kasturi holds office up
to the date of the forthcoming Annual General Meeting of the Company and is
eligible for appointment as Director. The Company has received notice under
section 257 of the Companies Act, 1956 from a member in respect of her
appointment as a Director of the Company. Resolution seeking approval of
the members for the appointment of Ms. Revathi Kasturi as a Director of the
Company have been incorporated in the notice of the forthcoming Annual
General Meeting.
As stipulated under Clause 49 of the Listing Agreement with the Stock
Exchanges in India, brief resumes of Ms. Revathi Kasturi and Mr. Sumit
Chandwani are provided in the report on Corporate Governance, which forms
part of this Annual Report. Your Directors recommend their appointment/ re-
appointment at the ensuing Annual General Meeting.
Director`s Responsibility Statement
Pursuant to the requirement under Section 217(2AA) of the Companies Act,
1956 with respect to Directors` Responsibility Statement. It is hereby
confirmed that:
i) in the preparation of the annual accounts for the year ended March 31,
2012, the applicable accounting standards read with requirements set out
under Schedule VI to the Companies Act, 1956, have been followed and there
are no material departures from the same;
ii) the Directors 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 as at March 31, 2012 and of the profit of the Company for the year
ended on the date;
iii) the Directors have taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting fraud and other irregularities;
and
iv) the Directors have prepared the annual accounts of the Company on a
`going concern` basis.
Auditors
M/s. Walker, Chandiok & Co, Chartered Accountants, Statutory Auditors of
the Company, hold office until the conclusion of the ensuing Annual General
Meeting and are eligible for re-appointment. The Company has received
letter from the Auditors to the effect that their re-appointment, if made,
would be within the prescribed limits under Section 224(1B) of the
Companies Act, 1956 and that they are not disqualified for re-appointment
within the meaning of Section 226 of the said Act. The Notes on Financial
Statements referred to in the Auditors` Report are self-explanatory and do
not call for any further comments.
Public Deposits
Your Company has not accepted any public deposits and as such, no amount on
account of principal or interest on public deposits was outstanding as on
the date of the Balance Sheet.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings
and Outgo
Your Company continuously strives to conserve energy, adopt environment-
friendly practices and employ technology for efficient operations. The
particulars as prescribed under section 217(1)(e) of the Companies Act,
1956 read with the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988 are provided in the Annexure II to this
Report.
Corporate Social Responsibility (CSR)
Your Company uses CSR as an integral business process in order to support
sustainable development and constantly endeavors to be a good corporate
citizen. The CSR activities are presently carried out in the areas of
education, health and environment at the Company`s various project
locations. During the financial year, your Company has executed `Under
Privileged Learning Innovations for Transformation` (UPLIFT) project, a
unique educational project for the students of a school in the vicinity of
the Corporate Office. The project focuses on scientific learning skills
training programme for underprivileged students. Your Company strongly
believes in serving the cause of students` community through this project.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975 as amended,
the names and other particulars of the employees are set out in the
annexure to the Directors` Report. Having regard to the provisions of
Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the
aforesaid information is being sent to all the members of the Company and
others entitled thereto. Any members interested in obtaining such
particulars may write to the Company Secretary at the Registered Office of
the Company.
Corporate Governance Report
Your Company is committed to maintain the highest standards of Corporate
Governance and adhere to the Corporate Governance requirements set out by
SEBI. The Company has also implemented several best Corporate Governance
practices as prevalent globally. The Report on Corporate Governance forms
part of the Annual Report. The requisite Certificate from the Auditors of
the Company confirming compliance with the conditions of Corporate
Governance as stipulated under the aforesaid Clause 49, is attached to this
Report.
Acknowledgements
Your Directors would like to express their appreciation for the assistance
and co-operation received from the Financial Institutions, Banks,
Government authorities, Customers, Vendors and Members during the year
under review. Your Directors also wish to place on record their deep sense
of appreciation for the committed services by every member of the Wabag
family globally.
For and on behalf of the Board of Directors
Rajiv Mittal Sumit Chandwani
Managing Director Director
Date: May 24, 2012
Annexure I to the Directors` Report for the year ended March 31, 2012.
Information to be disclosed under Securities and Exchange Board of India
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 and forming part of the Directors Report for the year
ended March 31, 2012.
A. Summary
Particulars ESOP 2006
a. Number of options granted 9,95,053
b. Pricing formula The options were granted prior to the
listing of Company`s shares. These
options were granted, based on the
valuation done by an Independent
Chartered Accountant using Net Asset
Value (NAV)/Profit earning capacity
value method (PECV)
c Number of options vested 9,35,362
d Number of options
exercised 9,11,218
e Total number of shares
arising as a result of
exercise of exercise
of options 9,11,218
f Number of options lapsed 59,691
g Variation of terms of The options granted, vested and
options the exercised have been adjusted for the
split and bonus of the equity shares effecte
on September 19, 2009 and split of the
equity shares effected on August 17, 2011.
h Money realized by 3,24,28,574
exercised of options
(Amount in Rs.)
i Total number of
options in force 24,144
B. Employee-wise details
of options granted to
(I) Senior Managerial
Personnel
1. Mr. Patrick Andrade Nil
2. Mr. Rajneesh Chopra
(ii) Employees who were None
granted, in any one
year, options amounting
to 5% or more of the
options granted during
the year.
(iii) Identified employees None
who were granted options,
during any one year, equal
to or exceeding 1% of the
issued capital (excluding
outstanding warrants and
conversions) of the
Company at the time of
grant.
Particulars ESOP 2010
Grant I Grant II
a. Number of options
granted 10,92,355 1,06,927
b. Pricing formula The options were granted Discount up to a maximum
prior to the listing of of 25% to the Closing
Company` shares. These Market price per option,
options were granted, where the Closing
based on the valuation Market Price shall be
done by an Independent the latest available
SEBI Registered closing price one day Registered Merchant Banking prior to the date of the meeting
marchant banking Prior to the date of the
Company using Net Asset meeting of the
Value (NAV)/Profit Remuneration Committee
earning capacity value in which the options
method (PECV). are granted. The market
price on the stock
exchange showing the
highest volume of trading
would be considered. The
Discount rate applicable
will be decide by the
Remuneration Committee.
c. Number of options 2,35,805 Nil
vested
d Number of options
exercised 707 Nil
e Total number of
shares arising as
a result of exercise
of exercise of options 707 Nil
f Number of options lapsed 1,82,722 6151
g Variation of terms of The options None
options granted, vested
and the exercised
have been adjusted
for the split of
the equity shares
effected on August
17, 2011.
h Money realized by 2,54,520 Nil
exercised of options
(Amount in Rs.)
i Total number of
options in force 9,08,926 1,00,776
B. Employee-wise details
of options granted to
(I) Senior Managerial
Personnel
1. Mr. Patrick Andrade Nil 7500
2. Mr. Rajneesh Chopra 3750
(ii) Employees who were None None
granted, in any one
year, options amounting
to 5% or more of the
options granted during
the year.
(iii) Identified employees None None
who were granted options,
during any one year, equal
to or exceeding 1% of the
issued capital (excluding
outstanding warrants and
conversions) of the
Company at the time of
grant.
C. Diluted Earning per
share (EPS) pursuant to
issue of shares on
exercise of options
calculated in accordance
with Accounting Standard
(AS) 20. 28.36 28.36
D. The impact on the
Profits and EPS
Of the fair value method
is given in the table
below-
Rs. in Lakhs Rs. in Lakhs
Profits as reported 7,512 7,512
Add - Intrinsic Value Cost 0 0
Less - Fair Value Cost 436 436
Profits as adjusted 7,076 7,076
Earnings Per Share
(Basic) as reported 28.41 28.41
Earnings Per Share
(Basic) adjusted 26.76 26.76
Earnings Per Share
(Diluted) as reported 28.36 28.36
Earnings Per Share
(Diluted) as adjusted 26.71 26.71
E. Weighted average
exercise price and fair
value of options
Weighted average exercise
price of options whose
(a) Exercise price
equals market price Nil Nil
(b) Exercise price is
greater than market price 360 360
(c) Exercise price is
less than market price Nil Nil
Weighted average fair
value of options whose
(a) Exercise price
equals market price Nil Nil
(b) Exercise price is
greater than market price 68.57 114
(c) Exercise price is
less than market price Nil Nil
F. Method and Assumptions
used to estimate the fair
value of options granted
during the year
The fair value has been
calculated using the
Black Scholes Option
Pricing model
The Assumptions used in
the model are as follows:
Date of grant 1-Oct-2010 10-Nov-2011
1. Risk Free Interest Rate 7.61% 8.86%
2. Expected Life 4.50 4.00
3. Expected Volatility Nil 31.91%
4. Dividend Yeild Nil 1.17%
5. Price of the underlying
share in market at the
time of the option grant
(Rs.) 328 341.9
* Note: The price of underlying shares in the market at the time of options
grant for ESOP scheme 2010 grant II is disclosed as closing price of shares
at NSE as on November 9, 2011.
For and on behalf of the Board of Directors
Place: Chennai Rajiv Mittal Sumit Chandwani
Date : May 24, 2012 Managing Director Director
Annexure II to the Directors` Report for the year ended March 31, 2012
Particulars as per the Companies (Disclosure of particulars in the Report
of Board of Directors) Rules, 1988 and forming part of the Directors`
Report for the year ended March 31, 2012.
A. Conservation of Energy
a. Energy Conservation measures taken : N.A.
b. Additional Investments and proposals,
if any, being implemented for reduction
of consumption energy : N.A.
c. Impact of the measures at (a) & (b)
above for reduction of energy consumption
and consequent impact on the cost of
production of goods : N.A.
d. Total energy consumption and energy
consumption per unit of production as
per Form-A of the Annexure in respect
of industries specified in the schedule : N.A.
B. Technology Absorption
e. Efforts made in technology absorption }
Research & Development (R&D) }
}
1. Specific areas in which Research & }
Development is carried out by the } : Please refer to MDA section
Company } forming part of the Annual
} Report
2. Benefits derived as a result of the }
above R&D }
}
3. Future plan of action }
4. Expenditure on R&D : (Rs. In Lakhs)
a. Capital 508.09
b. Recurring -
c. Total 508.09
d. Total R&D expenditure as a
percentage of total turnover 0.35%
5. Technology absorption, adaptation }
and Innovation }
} Please refer to MDA section
(1) Efforts, in brief, made towards } forming part of the Annual
technology absorption, adoption and } Report
innovation }
}
(2) Benefits derived as result of }
the above efforts, e.g., product }
improvement, cost reduction, product }
development, import substitution, etc }
(3) Incase of Imported technology
(imported during last 5 years
reckoned from the beginning of
the financial year), following
information may be furnished:
(a) Technology imported : N.A.
(b) Year of Import : N.A.
(c) Has technology been fully absorbed? : N.A.
(d) If not fully absorbed, areas where
this has not taken place, reasons
there for and future plans of action. : N.A.
C. Foreign Exchange Earnings and Outgo
(f) Activities relating to exports, : The Company continuously strives
initiatives taken to increase exports, to improve its export earnings.
development of new export markets for Further details in respect of
products and services; and export exports are set out elsewhere
plans; in the report
(g) Total foreign exchange used and : For the year ended March
earned: 31, 2012 (Rs. In Lakhs)
Earning in Foreign Exchange : 21,724
Expenditure in Foreign Currency: : 9,842
For and on behalf of the Board of Directors
Place: Chennai Rajiv Mittal Sumit Chandwani
Date : May 24, 2012 Managing Director Director
MANAGEMENT DISCUSSION AND ANALYSIS
Global water market
Water demand is expected to increase rapidly. A population surge in the
last 40 years - from 55 crore in 1971 to 121 crore in 2011 - has more than
doubled fresh water consumption. Scientists estimate that while we
currently `withdraw` about 50 per cent of globally accessible and renewable
water on an annual basis, this is set to increase as the world`s population
grows to 9.4 billion by 2050 (UN estimate).
Much of this population growth is expected to occur in developing and
emerging countries. Around four billion people live in the Asia-Pacific
region but by 2030, this is expected to grow to five billion owing to
urbanisation, dietary and lifestyle changes and industrialisation and
substantially increase the demand for water.
An alarming scenario
Currently, around 1.6 bn people live in countries or regions with absolute
water scarcity. By 2025, two-thirds of the world`s population could be
living in water-stressed conditions [Source: Business Standard, March 22,
2012]
Indian water market
A country like India with a huge population and undergoing fast
urbanisation has the task of making safe water and sanitation facilities
available to growing cities and towns. On the one hand, the municipalities
are cash-crunched and in serious need of financial support to implement any
water project: on the other hand, the low or no water tariff does not cover
investment payback. Piping network for rational distribution and proper
metering is absent in most Indian cities and towns.
Growth opens up opportunities for more treatment plants, private sector
participation in public utilities, industrial water recycling, sea water
desalination and making existing and new installation of municipal
wastewater treatment plants self-sustaining through power generation.
Water resource market: The total Indian water market exceeds USD 15
billion. The government sector contributes a little more than 50%, with the
rest of the business coming from the private industrial sector. The overall
water market is growing at 10 -12% annually, with even higher growth rates
in the industrial and drinking water segments. Currently, 75% of the rural
population and 85% of the urban population have access to public water
supplies. [Source: Way to wealth research].
Market overview: India has 17.3% of the world`s population, but
comparatively only 2.5% of the earth`s landmass and 4% of its water
resources. These limited resources are depleting while consumption is
increasing.
- According to a recent government assessment, industrial water requirement
will quadruple from a prevailing 30 billion cubic meters to 120 billion
cubic meters by 2025.
- There is an increased demand for drinking water and sewage treatment
owing to declining resource availability, media pressure, stronger
regulatory clearances and need for enhanced equipment effectiveness.
State of urban water services in India
India Other countries
Water coverage 64 per cent of urban Around 91 per cent in China,
population covered 86 per cent in South Africa,
by individual and 80 per cent in Brazil
connections and
standposts
Water supply One hour to six hours 24 hours in Brazil and China
duration and 22 hours in Vietnam
Urban per capita From 37 lpcd to 298 Paris supplies 150 lpcd
water supply lpcd for a limited continuously and Mexico
duration 171 lpcd for 21 hours a day
Metering system Absent in most Indian Metering system in place
cities
Revenue water 50 per cent of water 95 per cent in Singapore
production
Source: HPEC report
Trends: India`s National Water Policy allocates water consumption
priorities in the following order: drinking, irrigation, hydroelectric
power, ecology, industries (agricultural and non-agricultural), navigation
and others.
The principal Indian water service providers comprise municipal authorities
and public health departments. The major industrial consumers comprise
cement, chemicals, fertilisers, food & beverage, paper, pharmaceuticals,
power, refineries, sugar, tanneries and textiles; major commercial
establishments comprise hospitals, hotels and housing developments.
India`s National Draft Water Policy 2012 encourages private participation
in the planning and operation of water systems. Some municipal bodies and
water boards have also begun revising water charges upwards. In the
multilateral agency arena, Asian Development Bank, World Bank and Japan
Bank for International Cooperation promoted water projects as part of
integrated urban development projects.
Grim future
India`s annual surface water availability is estimated at 1,869 billion
cubic metre (bcm); the total utilisable water is 1,122 bcm, just sufficient
to address existing needs. The Water Resources Group estimates that if the
existing consumption pattern sustains, about half the country`s water
demand will be unmet by 2030 [Source: IIR 2009]. Of India`s 20 major river
basins, 14 are water-stressed. Nearly three-fourth of India`s population
lives in water-stressed regions (where per capita availability is less than
2,000 cubic metres per year) and of this, a third are in water-scarce areas
(per capita water availability less than 1,000 cubic metres per year).
Industry growth drivers
The growth drivers of the Indian water market are influenced by the
following:
Increasing population: India accounts for 17.3 per cent of the global
population, 42 per cent falls below the international poverty line (source:
World Bank) and access to safe water is scarce. Over the next few decades,
India is expected to emerge as the most populous country, escalating water
demand.
Growing opportunity: Growing concerns about water safety widened industry
opportunities. About 38,254 million litres per day (mld) of wastewater is
generated in urban India with a population of more than 50,000 (more than
70 per cent of the urban population). India`s municipal wastewater
treatment capacity is estimated at about 11,787 mld or only about 31 per
cent of the urban total wastewater generation. The projected global urban
wastewater generation may cross 120,000 mld by 2051 while India generates a
significant 50,000 mld, making it imperative to invest in wastewater
treatment infrastructure.
There is a growing market for sustainable water treatment technologies
(covering energy efficiency, recycling, resource recovery, reuse and
wastage reduction). Water conservation and wastewater recycling will widen
the market for water audits, new technologies, exploration of alternative
sources, progression towards turnkey solutions and outsourcing operations
and management (O&M) services. The construction opportunity in the water
supply and sanitation sector alone is estimated at Rs. 664 bn in five
years.
India is urbanising...
India`s urban population will increase...
* From 377 million today to 600 million by 2031
* From 50 metropolitan cities in 2011 to 87 by 2031
* From 160 million population in metropolitan cities in 2011 to 255 million
by 2031
* From 217 million in other cities and towns in 2011 to 343 million by 2031
[Source: HPEC Report]
Focus areas
The Government of India emphasises water management infrastructure
development through landmark initiatives like Jawaharlal Nehru National
Urban Renewal Mission (JNNURM), Urban Infrastructure Development for Small
Scale and Medium Towns (UIDSSMT) and public-private partnership (PPP)
projects.
JNNURM: It is estimated that around 20% investment of the total envisaged
investment of around Rs 39.2 lakh cr (2009-10 costs) in India`s urban
infrastructure development across the next 20 years is expected to be
accounted for by water, sewerage, solid waste managements and storm water
drains (Source: HPEC report).
Plan outlays: The Eleventh Plan outlay for rural water supply and
sanitation under the State and Central Plans were Rs. 48,875 crores and
Rs.47,306 crores respectively. The total outlay for urban water supply and
sanitation was Rs. 75,000 crores. A total outlay of between Rs. 2,72,377
crore and Rs. 3,03,165 crore is suggested for the Twelfth Five-Year Plan
for rural domestic water supply.
National Water Policy 2012 (draft): This policy encourages water recycling
and reuse (including return flows), project financing to incentivise
efficient and economic use of water and early project completion, the
pricing of water services, penal fees for pollution, reuse urban water
effluents after primary treatment, wider use of desalination and a facility
to return treated effluent to a specified standard back to the hydrologic
system.
Union Budget 2012-13: Allocations for the water sector increased 27% to
Rs.14,000 crore. The sanitation sector posted a 133% rise in allocations to
Rs.3,500 crore.
The government also allocated Rs 31,500 crore for Urban Infrastructure
Governance comprising urban renewal, water supply (including desalination
plants), sanitation, sewerage and solid waste management, urban transport,
developing heritage areas and preserving water bodies (Rs 6,423 crore in
2011-12).
Strategic Business Unit (SBU) reviews
As part of the Company`s ongoing corporate strategy, the focus has been
shifted from `geography` to `product` w.e.f. FY13 and accordingly,
Desalination Business Group has recently been formed in place of
International Business Group to address the growing desal market
requirements. Going forward, all SBU`s will handle both indian and overseas
business.
Municipal Business Group (MBG)
Overview
The Municipal Business Group (MBG) provides water and waste water treatment
solutions to municipalities and industries. The group provides solutions
covering drinking water treatment plants, sewage schemes, industrial
wastewater treatment plants and pumping stations. The MBG is a major
contributor to the Company`s revenues through EPC contracts in India.
Strengths
* Robust design foundation: The Company possesses decades of design
experience, making it possible to customise designs around customer needs
with speed and efficiency, supported by vendors who provide relevant
components
* Ability to handle complex projects: The Company embraces challenges of
project size, terrain and complexity
* Scale: The Company presently executes India`s largest municipal
desalination project of Rs 1,033 cr 100 MLD Nemmeli project in Chennai
together with IWG and OBG
* Team: The group comprises 150 members; more than 88% possess a rich
technical background
Highlights
* Executed water infrastructure projects for Delhi Jal Board, coke oven
plant in Durgapur Projects Limited and Kerala Water Authority among others
* Received a Rs 250 cr sewage treatment plant order from Delhi Jal Board
Outlook
Going ahead, MBG expects to grow its topline by 20% in 2012-13, seek to
enhance productivity and provide a superior customer experience.
Industrial Water Group (IWG)
Overview
The SBU executes water projects for large industrial clients (oil
refineries, steel plants and power plants) and provides plants for
demineralisation, reverse osmosis, thermal-based desalination, condensate
polishing, wastewater recycling and zero liquid discharge.
Strengths
* Established technology to recycle industrial waste water into reuse
* Strong EPC management
* Turning around projects with success
Outlook
The SBU expects to achieve the following in 2012-13:
* Reinforce competitiveness; emerge as a specialised service provider
* Focus on the power, petroleum refinery and fertiliser sectors
International Business Group (IBG)
Overview
The SBU caters to water and wastewater treatment needs of municipal and
industrial customers outside India (South East Asia, the Middle East and
SAARC countries). The SBU works together with Austrian subsidiaries in
overlapping markets.
Highlights
* Record sales turnover and EBIDTA achieved for the SBU
* Highest EBIDTA of all business units worldwide
* Commenced operations in Philippines through a full-fledged subsidiary/MDU
and reported a positive bottomline from the first year of its existence
* Secured its first project in Qatar in sea water desalination. This will
be an important market leading up to FIFA 2020
* Executing the third project in Oman involving major capacity expansion
variation
* Good progress achieved on Dambulla Water Supply Scheme, the first project
in Sri Lanka
* Developing cooperative relationships with other companies to bid for
major projects in partnership
* Working closely with WABAG Austria to improve competitiveness and secure
work in WABAUT territories
Strengths
* Relationships/alliances developed with local partners in various
countries
* Ability to understand and work with different cultures and clients
* Globally competitive due to low-cost Indian operations
* Track record and references in various countries in our domain
Outlook
* Focus on desalination as an area of opportunity
* Expand footprint and venture into new markets like Malaysia, Vietnam and
Cambodia
* Develop funded projects in other emerging markets
Operations Business Group (OBG)
Overview
This division provides O&M services to Indian and international municipal
corporations and industrial clients. The division services international
clients in geographies covered by IBG. It provides complete O&M services
(including organisation, staffing, supply of chemicals and consumables,
supply of spares, major and minor repairs, and equipment replacement and
plant refurbishment). These contracts provide steady revenues as they are
typically longer (5-7 years) compared with EPC (18-30 months). The Company
is executing 56 contracts across 58 Indian and international locations.
Strengths
* Strong technical expertise supported by an in-house technical engineering
team
* Quality and skilled manpower
* Leverage the rich research competence of WABAG worldwide
* System-based SCADA helps to monitor projects from remote locations
Highlights
* Received eight new contracts during the year under review
* Conducted a customer satisfaction survey with 97% of the customers saying
that they were happy
* For the Nemmeli desalination project, O&M services will commence from
2012-13 for seven years, valued at Rs 500 crores
Outlook
The division expects to make a breakthrough in Malaysia and be awarded
refurbishment projects. It expects to substantially contribute to the order
book in 2012-13.
How WABAG`s O&M service enhances customer value
* Superior plant life
* Assured water quality and quantity
* Senior technology team supports technical review of the plant performance
every month
* Lower overall cost of production
* Optimise chemical and power consumption and save manpower cost
* Green initiative as some plants generate biogas for captive use or
merchant sale
MAJOR OVERSEAS SUBSIDIARIES
WABAG Austria
Overview
WABAG Austria`s business covers water treatment and wastewater treatment,
desalination, as well as sludge treatment for municipalities and
industries. From planning, design & engineering to construction and long-
term operational management.
WABAG Austria holds 11 subsidiaries and branch offices in its key markets -
covering Europe, the Maghreb region and Middle East. WABAG Vienna - as the
European headquarters -supports its subsidiaries in areas like business
development and marketing, proposal management, project execution and
finance.
WABAG Vienna together with WABAG Switzerland possesses deep research
competencies in advanced water treatment technologies built over the
decades.
Strengths
* High-quality level: the Company in Austria provides strong technology,
high brand recognition and international execution capabilities leading to
top-quality plants.
* Project execution: The subsidiary possesses the capability to execute
large projects in various countries/regions - also in demanding
environments (ticket size of more than 10 million Euro)
* Coverage: The subsidiary addresses growth coming out of important markets
like Middle East, Tunisia, Algeria, Turkey, Libya and Russia.
* Technology: The WABAG Austria Group possesses deep knowledge in specific
technologies, e.g. nitrate removal from ground water (BIODEN), biological
wastewater treatment (BIOPUR, FLUOPUR), MBR-Technology (MARAPUR), membrane
filtration for drinking water treatment (WABAG Switzerland),
* Challenging circumstances: The subsidiary is known for executing projects
in diverse challenging environment -e.g. RO-plants in deserts in Saudi
Arabia and Algeria, advanced wastewater treatment plants at mountains
(Alps) or specific impurities (micro-pollutants or nitrate) in water or
wastewater.
Highlights
* WABAG Austria and its subsidiaries posted a revenue of EUR 62.7 Mio in
2011-12
* WABAG Austria and it subsidiaries acquired an order book of 99.03 million
Euros
Outlook
The division expects to achieve the following during 2012-13:
* Bag a large project in Russia
* Bag several projects in Algeria
* Commercialize projects from R&D pilot stage
WABAG Switzerland:
This subsidiary enjoys a high market share in the local Swiss water market
for its advanced technologies. Their new order intake includes -
* Andermatt Waste water treatment plant;
* Basel drinking water treatment;
* Sonzier drinking water treatment plant (Membrane filtration) and
* Stafa waste water treatment plant (MBR)
This subsidiary had an order book growth of 23% over the previous year
WABAG Czech Republic:
WABAG Brno serves the industrial water market in the Czech Republic. They
executed five Mio Euro projects for the year 2011-12. WABAG Czech Republic
also covers Slovakia and Serbia, which formed part of former Soviet Union.
WABAG Romania:
This subsidiary is engaged in construction and operational management of
industrial and municipal water and wastewater plants in Romania. During the
year, they executed O&M of waste water treatment plants of Oil and Gas
Company OMV Petrom SA of their Petrobrazi and Arpechim refinery with a
workforce of 160. During the year, they had a significant order intake of
RON 95 million.
WABAG Turkey:
It was started during the year and they bagged their first order from
Siverek waste water treatment plant (Order value Euro 7.7 milion) for the
city of Siverek with anaerobic sludge digestion and biogas utilisation.
Turkey being a highly potential market, WABAG Turkey plans a rapid growth
in this market.
WABAG Algeria:
WABAG Algeria had its first year as a Profit Centre during FY12 and they
bagged their maiden order for a value of Euro 7.1 million for El Qued
Brackish Water Desalination plant based on Reverse Osmosis technology.
They also signed a framework contract for Beni Messous waste water
treatment plant for Euro 6.8 million.
Besides, they also achieved Final Acceptance Certificates (FAC) for waste
water treatment projects of ORAN, JIJEL and MEDEA.
WABAG Philippines:
Philippines MDU is a classic example of cross-unit collaboration. The
business plan of this MDU envisages a healthy order intake in FY 2012-13.
Business support
Research and development
Overview
The Company is uniquely placed in the global water infrastructure
management industry through the ownership of dedicated research and
development units in Austria, Switzerland and India. The Company possesses
over 100 patents in water treatment technology.
The Company`s research is directed at the following: reduce operational and
life cycle costs, reduce space utilisation for water infrastructure
projects, efficiency in converting waste into biogas, environment
friendliness, scalability from pilot scale to main plant and system
standardisation to accelerate design generation.
The Chennai R&D centre entered into a memorandum of understanding with the
Chennai-based Centre of Environment Studies of Anna University to establish
a research programme in process and product development with downstream
applications in the areas of water and wastewater treatment system.
Highlights
The Company undertook two research programmes: (i) The combination of UASB
and MBR technologies to ensure optimised energy generation/consumption and
high quality treated sewage for reuse, (ii) Replace polymeric membrane
technology with ceramic membrane technology to produce potable water and
reuse treated sewage/effluent.
International Engineering Centre (IEC)
Overview
The International Engineering Centre was started by the Company at Pune in
2008 to provide innovative engineering services (design products and
projects) to its various business groups to enhance overall global
competitiveness. Presently, the team comprises 70 professionals with an
expertise in process engineering and detailed mechanical design (including
pressure vessels and large tank designs, piping engineering) civil and
structural design, electrical engineering and instrumentation engineering.
IEC played a pivotal role in providing pre-tender support and in executing
WABAG projects in India and abroad. It engineered projects based on a wide
technology range.
Strengths
Manpower: The core group possesses more than three-decade domain experience
and international exposure.
Productivity tools: The team`s investment in software based on parametric
design principle for vessels and tanks reduced the project life cycle. The
3D piping software facilitated accurate piping designs. System automation
reduced human intervention and cycle time. The Company also invested in
Staad for structural and civil analysis. The combination of these
productivity tools translate into superior quality and timely output.
Highlights
* Currently engineering the 20 MLD brackish water reverse osmosis plant at
El Oued in Algeria
* Invested in resource scalability tools to handle larger projects
* Standardised demineralisation plant designing around module configuration
to create different modules so that 80% of the plant is pre-designed,
leading to bid accuracy and faster project turnaround
Overseas projects handled by IEC
* Duqm desalination plant
* Al Khalij high pressure condensate polishing plant through Hyundai
Engineering Corporation and Bechtel, USA
* Cerebon SWRO mixed bed and wastewater treatment plant in Indonesia
* Rembang desalination project using MED technology
* Suralaya desalination plant using MED technology
* 21 container plants for the Vienna office
Human Resource Management
In a business that develops and deploys advanced technologies, recruiting
and retaining competent human resources across diverse geographies is
critical to sustainable growth.
WABAG is a multi-national employer of specialised engineering talent. The
Company employs around 1,500 persons from across 22 nationalities; 60% of
the Company is Indian while 40% of the organisation is based in Europe,
China and North Africa.
The Company reconciles core engineering competencies on the one hand
(around 80% of the employees possess technical background) with a youthful
profile on the other (average age of 36), making it different. The Company
enjoyed a retention of 81% during the year under review.
Over the years, the Company reinforced its engineering capabilities through
the following initiatives:
Recruitment: The Company reinforced its talent pool through campus and
lateral recruitments.
Training: All new recruits were imparted classroom training followed by on-
the-job training on the basis of annual appraisals. Employees with
entrepreneurial skills are inducted into a `young leaders` training
programme to reinforce the leadership pipeline. Employees were provided
opportunities to attend industry seminars in India and abroad
Motivation: Following two years of service, trainee engineers are promoted,
outstanding GETs awarded (star performer, special contribution award and
employee of the month awards). Employees are also offered health check-up
facilities, medical insurance, medical bill reimbursement and life
insurance policies. The Company continued promoting inter-departmental
relations through SPARXX programme.
WABAG believes in sharing wealth with all its employees, reflected in the
Company providing ESOPs to its employees.
Apart from sharing the wealth with employees in the form of grant of ESOPs,
the Company provides growth opportunities to the employees with the
formation of SBUs and MDUs. Functional Heads in different disciplines have
now become Country Managers in Philippines, Sri Lanka and Turkey. Talent
transformation is on the top of management agenda and focussed leadership
programmes are organised and conducted with a view to develop young
leaders.
The Indian HR team works with its Austrian counterpart for recruitment,
transfer of best practices and ERP implementation across locations.
Health, Safety and Environment
In an engineering business that requires projects to be commissioned across
terrains by using various construction materials and challenging processes,
it is critical to keep the sites and workplace safe for the Company`s
employees and contracted construction workers at all times.
High risks are involved in constructing, operating and maintaining plants.
These comprise: deep excavation, personal fall from heights, electrocution,
fall of materials, fire, radiation and hazardous chemical exposure, among
others. Over the years, the Company enhanced awareness of the importance of
safety practices through HSE Communication such as induction training, tool
box talks and specific training modules for medium and high risk
activities. These risks are controlled by suitable engineering and personal
protective equipment as well.
The Company achieved one million accident-free hours at the IOC-Paradip
project during the year under review. The Company aims to establish HSE
standards on par with global practices.
Internal Control
The Company has adequate internal control systems that are embedded in the
business processes. These are administered and enhanced through an
Enterprise Resource Planning (ERP) package. Various transactional risks are
effectively taken care of not only through assurance, but also various
tools in the ERP system. The Company has well documented procedures and
levels of authorization that govern the conduct of business at various
levels.
The Company has a strong internal assurance team to support the Group
Managing Director directly to identify and manage the operational and
business risks. The effectiveness of the internal control mechanism is
reviewed by independent internal audit function and by the statutory
auditors. The Audit Committee of the Board periodically reviews the
functioning of the internal audit and the implementation of recommended
measures to improve the internal control framework.
Cautionary statement
Certain statements in the Management Discussion and Analysis describing the
Company`s objectives, projections, estimates, expectations or predictions
may be forward-looking statements within the meaning of applicable
securities laws and regulations. Actual results could differ from those
expressed or implied. Important factors that could make a difference to the
Company`s operations include poor macroeconomic growth and consumer
confidence, pricing in the Company`s principal markets, government
regulations, tax regimes, economic development within India/abroad and
other incidental factors. |