Message from the Chairman

Dear Shareholders,

It is my pleasure to present the Annual Report for FY 2017-18. The year gone by was testing, but as the case with all obstacles, dark clouds have a silver lining too. We used this opportunity to reinvent ourselves and discover new growth avenues to tide over the slowdown in our mainstay EPC business. We are working to diversify our revenues with greater focus on the water distribution and our auto ancillary business. However, we remain steadfast in our focus on timely execution and quality focus. We expect, these efforts will pay off and fill the void developed due to slowdown in the power sector.

Our EPC business continued to face trying times with the overall slowdown in the thermal power sector. With enhanced focus on renewable fuel sources of generation, the thermal power sector is likely to witness pressures in times to come. The sector is going through a sluggish phase with capacity delays that led to a slowdown in new order booking for us. We also witnessed some slowdown in our Oil and Gas EPC business due to lapse of our eligibility license. We are working to overcome this hurdle by bidding for orders in the space as a joint contractor. In view of the sustained pressures on this segment, we made a tactical decision to diversify our operations and enhance our scope instead of taking on low margin orders and compress margins in an effort to stay afloat.

With our sustained track record of timely execution, engineering capabilities, and client relationships, we have begun focusing on the water distribution space. This sector holds ample potential in our Country. According to data from Dalburg Analysis, FAO and UNICEF, the Country is at the brink of a water crisis with 40% of the population expected to have difficulties in accessing drinking water by 2030. The Government has been steadily increasing budgetary allocation for the water sector, the 2018 union budget has increased the allocation by Rs 2,000 Crores for the purpose. This will be used to expand water resources for irrigation, drinking, and cleaning up the Ganga. The ministry is implementing key projects such as Namami Gange, Pradhan Mantri Krishi Sinchayi Yojana and river inter-linking. The above steps have led to increased orders in the pipeline and we expect to benefit from the same in the coming year.

Our other growth avenue will be auto component business, which we operated through our wholly owned subsidiary Xlerate Driveline India Limited. The auto-components industry accounts for 2.3% of India's Gross Domestic Product. This sector has been seeing favorable growth in the backdrop of robust growth in commercial vehicles, two-wheelers and passenger vehicles. The demand for Commercial vehicles is further expected to pick up due to pre-booking in light of compliance with BS-VI norms. Rising focus on infrastructure has also led to increasing demand of commercial and medium to heavy commercial vehicles. The passenger vehicles are well placed to witness strong growth on the back of increased demand in the key end user segments and pick up in rural incomes.

We made a substantial breakthrough in the OEM business; this is reflected in our auto component segment posting an annual revenue growth of 26% in FY 2017-18. To further enhance our presence in the sector, we are looking to forge alliances with new clients in commercial and passenger vehicles space. At the time, the OEM segment is providing recurring business and stability, the after market business is supporting our profitability and growth opportunities. Although, we have faced some temporary setback post the demonetization drive, the demand scenario has bounced back sharply recently.

Every hurdle gives us an opportunity to review and relook our actions, and the downturn in our main business segment has provided us with this opportunity. We have started thinking out of the box and came up with new avenues to scale our business. This has been a challenging yet exciting phase where our focus on quality and client relations have come to our aid. Going forward, we intend to grow in our newer focus areas of water distribution and auto ancillary space while retaining our core competencies in execution and timely execution.

In conclusion, I would like to thank all our shareholders for believing in us and standing by us through trying times. I would like to thank our customers and suppliers for their continued support in our existing and new growth plans. Last but of foremost value are our employees who have diligently worked with us on every step of the journey that we have undertaken, and are key to the success of our new path of revival. We firmly believe that our new efforts will bear fruit and put the Company back on the growth path.

With best regards,

Surinder Paul Kanwar
Chairman and Managing Director



Raunaq EPC International Ltd.
20 km Mathura Road,
P.O. Box- 353, P.O. Amar Nagar
Phone: +91-129-4288888
Fax: +91-129-4288823