LETTER TO THE SHAREHOLDERS: THE CHAIRMAN ADITYA BIRLA GROUP
The global scenario continues to be trapped in a low growth trajectory despite thesteep drop in crude oil and commodity prices. Furthermore a barrage of monetary stimulushas driven down interest rates close to zero in many of the advanced economies. With themonetary stimulus option by and large exhausted governments are more likely to turn tofiscal and structural measures to revive growth.
The IMF projects global growth to inch up from 3.1% in 2015 to 3.2% in 2016 andincreasing to 3.5% in 2017. Growth in the advanced economies is projected at 1.9% in 2016with US growth pegged at 2.4% Europe at 1.5% and Japan at 0.5%. Growth in the emergingmarkets in 2016 overall is projected at 4.1% much of it coming from China India andthe ASEAN region. Growth in Latin America is expected to be only 0.5% on account of a3.8% decline in growth in Brazil. No sustained upside is seen in oil and commodity pricesin 2016.
The path ahead for the global economy remains challenging with greater uncertaintiesthrown in. Concerns persist about the slowdown in China and its ability to shift smoothlyfrom export-led to domestic-led growth. Fiscal pressures will accentuate in the oilproducing countries including the rich Middle-East countries. Financial markets remainnervous and exchange rate volatility has been pronounced. This is reinforced by theimpending reversal of the interest rate cycle in the US.
Against the backdrop of a muted global economy Indias economy is anoutperformer. For FY 2016-17 GDP growth is projected at 7.5%. This would make it thefastest growing among the large economies. This is particularly creditable in the contextof two successive unfavourable monsoons and a decline in exports. Recent data indicate a5.7% year-on-year growth in eight of the key core sector industries against 2.3% growthregistered last year.
Inflationary pressures have been contained. The rise in the consumer price indexaveraged 4.9% in FY 2015-16 down from 5.9% in the previous year. The wholesale priceindex declined 2.5% on an averaged basis compared to a rise of 2% in the previous year.In FY 2015-16 merchandise exports and imports each fell over 15% over FY 2014-15. Thetrade deficit in FY 2015-16 was USD 118.5 billion a decline of 14% over the previousyear. The current account deficit narrowed sharply from USD 26.1 billion to USD 22billion representing 1.4% of GDP. Indias foreign exchange reserves as at March-end2016 were USD 360.2 billion. The government is also committed to meeting the currentyears fiscal target of 3.5% of GDP. Overall the economic fundamentals are sound.
There have also been positive moves on the policy front in areas related to ease ofdoing business promoting start-ups rationalising the tax structure and administrationand opening up more areas for foreign investment through the automatic route. Thegovernment is substantially stepping up infrastructure spending.
Having said that some issues come to the fore. For instance capital investment willtake time to revive given stretched corporate balance sheets low capacity utilisation(at only 72.5% in the organised industrial sector) and competition from imports. Slowglobal output and trade growth will continue to impact exports. There is also the overhangof non-performing assets in the banking sector. Much more also needs to be done to"monsoon-proof" the Indian economy.
I am glad to inform that the Corporate restructuring initiated in May 2015 is nowcomplete.
With this restructuring ABFRL combines India's leading Power-Brands with India'slargest value fashion Retailer to create a Fashion Powerhouse. With over 2100 storesspanning across 5.5 million square feet ABFRL reaches out to over 13 million discerningcustomers.
The year under review was a muted one for the apparel industry with most playersrecording low growths. Consumer spending was subdued which did impact the apparel sector.
Despite this challenging economic scenario ABFRL recorded a revenue of Rs. 6060 Crorewith an EBITDA of Rs. 409 Crore making it one of the best performing companies in theApparel sector.
As part of its planned strategy to play in the emerging fast growing segments of themarket ABFRL acquired the online and offline rights of young women fast fashion brandForever 21. With this acquisition ABFRL has created a strong play in one ofthe fastest growing segments in the Indian Apparel market.
Our People: Our Pride
Our employees have unflinchingly rallied around us. And for this I would say a big"thank you" to all of them.
Going forward we see a steady rise in income levels coupled with favourabledemographics and greater penetration of organised retail. This bodes well for the brandedapparel business which in my view is poised for strong growth in the coming years.
ABFRL is well positioned to exploit this growth with its strong brands distributionreach and product offerings across various categories and price points for varyingconsumer needs.
The Aditya Birla Group: In perspective
At the Group level we have done well both in terms of revenue and earnings. As amatter of fact the EBIDTA attained has been the highest ever.
Having worked extensively on the people front for over a decade I am happy to statethat our leadership processes are now mature. At the management level we have builtquality bench strength.
The Chairmans Series launched last year for senior leaders in the areas ofbusiness strategy finance and personal leadership saw 150 of our senior most leadersrecourse to these learning interventions.
To create a leadership pipeline to the Business Head roles within the next couple ofyears we have created the Aditya Birla Fellows programme. The managers who have won thisrecognition are put in charge of critical Group- wide projects under my personaloversight. Up until now we have named 14 managers who have tremendous potential to riseto the stature of Business Heads going forward.
A slew of other initiatives have been set afoot to grow leaders from within. To do sowe have announced a hiring freeze at the middle and senior management levels for the next3 years. It paves the way for accelerated talent growth.
In this context I am happy to state that our accelerated leadership programme CuttingEdge which prepares high potential leaders for P&L positions across our Group isgaining traction. It was launched last year. Up until now 20 of the 35 graduates of thisprogramme have already moved roles to take on higher responsibilities.
Furthermore the 250+ youngsters who joined us over 6 years ago as Group ManagementTrainees in our Leadership Associate Programmes (Lead) and Leadership Programme forExperienced youngsters (Leap) are shaping well. In the last 2 years nearly a 100 fromthis lot have moved across functions and businesses. Additionally we have 25 mid-careerparticipants who have joined us in the Group Manufacturing Leadership Programme. They tooare making significant contributions in our manufacturing business units.
The first batch of 14 participants in "Spring Board" (a programme designedspecially for high calibre women) graduated commendably to higher roles. The second batchof 39 women leaders is making good progress on their way to greater responsibilities. Asof now we have nearly 5000 women-14% in the managerial cadre.
In the last 3 years we have had more than 1100 inter-business and over 1000intra-business transfers of employees across levels.
At Gyanodaya the Aditya Birla Global Centre for Leadership Learning over 2000managers enrolled for learning programmes. With a mix of academics and live case studiesthese programmes enable our people to keep abreast of the developments in their area andstay contemporary.
Side by side the Gyanodaya Virtual Campus hosts more than 500 e-learning modules inmultiple languages. During the year over 25000 employees chose to access theseprogrammes.
The Aditya Birla Group Leadership Programme aimed at securing young talent from the toptier Business Schools of India has become aspirational.
I am happy to record that our Groups brand attractiveness has taken a quantumleap across 35 top B-Schools in India. Our Group features among the formidable Top-5 inthe A C Nielsen CRI Campus Recruitment India Index 2015.
All these moves are a testament to our commitment to accord a World of Opportunity forour people and they are leveraging it. Our people are fully aware of what business needsto succeed. They are committed to contribute their best to our values based performancedriven meritocratic culture. We are future ready.
KUMAR MANGALAM BIRLA
Chairman Aditya Birla Group