LETTER TO THE SHAREHOLDERS:
THE CHAIRMAN ADITYA BIRLA GROUP
The global economy continued to be subdued in 2016. The slowdown in the advancedeconomies of the West adversely impacted growth levels resulting in the slowing of theworld economic growth to 3.1% from 3.4% in the earlier year. The growth in emergingmarkets and developing economies was encouraging. However China and India experienced adeceleration. Financial markets reflected a broad uptrend notwithstanding Brexit and therate hikes by the US Fed.
Recent data reveals that the global economy is gaining momentum. PMIs (PurchasingManagers' Indexes) accelerating trade flows and better business and consumer confidenceare the key pointers. The IMF has projected global growth to notch up to 3.5% in 2017 from3.1% last year. Growth in the advanced economies is estimated at 2% with US growth at2.3% the Euro area at 1.7% and Japan at 1.2%. Growth in the emerging markets is pegged at4.5% driven largely by China India and the ASEAN region. Latin America is expected togrow only 1.1% affected by the weak trend in Brazil.
India is on a roll. There is a buzz about India as it blazes forth as the fastestgrowing economy in the world at 7.1%. The trade deficit in 2016-17 was USD 106 billionlower by 11% over the previous year. The current account deficit has been significantlypared. India's foreign exchange reserves as at March end 2017 were USD 370 billion.Investors are bullish. Foreign investment flows which were at over USD 60 billion inFY-17 are scaling new records. Markets are buoyant. Stock index is at a historic peak.India's global ranking has jumped up in competitiveness and on the innovation index.
The various initiatives and reforms of the Modi Government have built the platform fora quantum leap ahead. High impact national projects coming to grips with structuralissues which were holding back the country's progress innovative approaches in policymaking - have collectively contributed in driving India on a high growth trajectory. Goingforward the abiding sense is one of immense optimism and confidence in the future withthe nation slated to grow at 7.5% to 8%. India's narrative is unmatchable.
That said if there is one subject that needs greater attention on the government'sradar for the ensuing years it is the revival of investment activity and creation ofquality jobs in large measure. The Government is seized of these issues. The Governmenthas taken many steps including a sharp focus on improving ease of doing businessspeeding of green clearances and stepping up public sector outlays for infrastructure. Ibelieve it is a matter of time before the private sector investments pick up - as NPAsare resolved and corporate balance sheets are deleveraged.
Your Company's Performance
Your company clocked a turnover of Rs. 6633 Crores in FY17 making it India's firstbillion dollar pure play fashion company. This was a growth of 9.9% over the previousyear. EBITDA at Rs. 476 Crores recorded an upsurge of 17.5% over the previous year (Rs.405 Crores). Most importantly your Company turned profitable in FY17 with a Profit aftertax of Rs. 54 Crores as against a loss of Rs. 110 Crores in FY16. A laudable feat.
The Lifestyle Brands sustained their leadership position in the premium segment withstrong brand equity and a growing consumer base. Pantaloons has been growing fromstrength to strength. Today with 209 stores spread over 3.2 million sqft it is amongstthe leading players in the Value Fashion segment.
Your Company further fortified its position as a leading Apparel Player with theacquisition of the rights of the global fast fashion brand Forever 21 and signinglicensing arrangements with iconic British brands Ted Baker and Simon Carter. Thesepartnerships will help address the fast growing segments of Women's Fast Fashion and SuperPremium menswear.
With the launch of men's innerwear under the Brand Van Heusen your Company entered thelarge and growing innerwear market. Within eight months of the launch it has rapidlyexpanded distribution in the Southern region and is now poised to expand to the rest ofIndia. It has received a very positive response from consumers and retailers. Your Companyis confident of steadily building this into a large and profitable business over thecoming years.
The growth in the economy the reforms initiated by the Government and the increasedoutlay on infrastructure spend will lead to greater prosperity and rise in income levels.This will drive growth in discretionary spends. This bodes well for the branded apparelbusiness. ABFRL with its investment in key segments strong brands and distributionnetwork is well equipped to grow strongly in the years ahead.
A big thank you to all of our employees
Organisational agility excellence in execution customer centricity and costoptimization are a given. I believe to drive business growth in a sustainable manner thecriticality of our people - our intellectual capital is beyond expression. We deeplyvalue our employees' engagement and their commitment to our culture of innovation andperformance accountability.
Aditya Birla Group: In perspective
At the Group level our performance both in terms of revenue and earnings has beengrowing. In fact our EBIDTA has been the highest ever. In line with our people focus wehave strengthened the capacity of our leadership bench as well as employees across levels.Our Group's HR agenda is even more sharper and defining of our future. Our HR function hascollectively developed and clearly articulated the HR 2020 strategy across theorganization. It has clear actionables and review mechanisms focused on talenttechnology productivity and employer brand.
On the people front it has truly been an exciting year of development building on thestrong foundations of the earlier years.
As I had shared with you earlier we have 3 accelerated leadership programs. First -The Turning Point which prepares high potential leaders for P&L roles.
Second - Step Up which infuses a ready pipeline for Functional Head roles and
Third - Springboard designed especially for high caliber women leaders.
These have enabled us set up the requisite bench strength of leaders.
We have prepared 123 leaders for higher responsibilities over the last one year. Ofthis 26 have already taken on new roles. The Business leadership and I have personallyreviewed talent across the business and am happy to see the evolution of our structuredsuccession plans.
The hiring freeze came into effect in January 2016. This coupled with our leadershipdevelopment actions has resulted in extremely encouraging people moves. Over the lastyear we witnessed 5500+ career movements across the Group. Of these 600+ wereinter-business movements 150% higher than the previous year.
The Aditya Birla Group Leadership Program (ABGLP) is another strong source of buildingleaders. It has gained greater traction this year with 67% higher intake. From the earlierbatches 95 participants have over the last 2 years been given cross business andfunction exposures grooming them for a holistic perspective. I am happy to share that wecontinue to be an employer of choice amongst the top B schools in India. Our Groupfeatures among the formidable Top-5 in the A C Nielsen - CRI Campus Recruitment IndiaIndex 2016 as well.
Additionally to accelerate opportunities for our talent we have set up Talent Councilsled by Business Heads and Directors at the business and Group levels. Up until now morethan a 100 Talent Councils meetings have happened across the Group where the developmentplans of approximately 3000 colleagues have been discussed and actions taken.
Project Vega is yet another initiative launched this year. Its basic objective is toreview the agility of decision making in the organization keeping in view end-customerimpact. This has yielded significant changes to internal processes delegation ofauthority and speed of decision making in turn empowering teams and freeing up leadershipbandwidth. This along with our focus on technology enabled processes
I believe will keep us sharp and nimble.
Furthermore to hone and enhance our functional expertise Gyanodaya the Aditya BirlaGlobal Centre for Leadership & Learning launched Functional Academies last year. TheSales Marketing & Customer Centricity Academy and HR Academy enabled 1150 leadersbuild deeper expertise in their domain areas. Gyanodaya continues to deliver superiorlearning programs with over 1583 managers enrolled last year.
Additionally the Gyanodaya Virtual Campus hosts more than 500 e-learning modules inmultiple languages. During the year over 31664 employees accessed these e-learningprograms.
I am happy to update you that we are doubling our capacity in Gyanodaya throughupcoming expansion plans.
Our Group's solid reputation robust financials the quality and commitment of ourtalent our leadership positions in our businesses our operational excellence and our CSRengagement are our strengths that I believe will see us ride the wave of success.
Kumar Mangalam Birla
Chairman Aditya Birla Group.