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Aditya Birla Nuvo Ltd.

BSE: 500303 Sector: Industrials
NSE: ABIRLANUVO ISIN Code: INE069A01017
BSE LIVE 15:43 | 02 Dec 1246.85 -8.05
(-0.64%)
OPEN

1245.00

HIGH

1265.00

LOW

1242.00

NSE LIVE 15:55 | 02 Dec 1248.60 -4.30
(-0.34%)
OPEN

1250.10

HIGH

1265.40

LOW

1241.40

OPEN 1245.00
PREVIOUS CLOSE 1254.90
VOLUME 7247
52-Week high 1664.00
52-Week low 685.00
P/E 12.74
Mkt Cap.(Rs cr) 16237.73
Buy Price 1247.00
Buy Qty 9.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1245.00
CLOSE 1254.90
VOLUME 7247
52-Week high 1664.00
52-Week low 685.00
P/E 12.74
Mkt Cap.(Rs cr) 16237.73
Buy Price 1247.00
Buy Qty 9.00
Sell Price 0.00
Sell Qty 0.00

Aditya Birla Nuvo Ltd. (ABIRLANUVO) - Chairman Speech

Company chairman speech

Dear Shareholder

GLOBAL ECONOMY

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.

INDIAN ECONOMY

Against the backdrop of a muted global economy India's economy is an outperformer. ForFY 2016-17 GDP growth is projected at 7.5%. This would make it the fastest growing amongthe large economies. This is particularly creditable in the context of two successiveunfavourable monsoons and a decline in exports. Recent data indicate a 5.7% year-on-yeargrowth in eight of the key core sector industries against 2.3% growth registered lastyear.

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 2.0% in the previous year.In FY 2015-16 merchandise exports and imports each fell over 15% over 2014-15. The tradedeficit in FY 2015-16 was USD 118.5 billion a decline of 14% over the previous year. Thecurrent account deficit narrowed sharply from USD 26.1 billion to USD 22.0 billionrepresenting 1.4% of GDP. India's foreign exchange reserves as at March-end 2016 were USD360.2 billion. The Government is also committed to meeting the current year's fiscaltarget 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.

Your Company recorded a consolidated revenue of USD 3.6 billion (' 23129 Crore) duringFY 2015-16. EBITDA expanded by 13% to USD 1 billion (' 6535 Crore) and net profit surgedby 33% to USD 290 million (' 1886 Crore).

STRATEGIC MOVES

As part of its growth strategy your Company has strengthened its portfolio to include- Solar Power Payments Bank and Health Insurance. Towards this your Company has enteredinto a 51:49 Joint Venture with the Abraaj Group (Dubai) for Solar Power Idea Cellularfor Payments Bank and MMI Holdings (South Africa) for Health Insurance.

I would like to dwell briefly upon these new ventures.

Your Company has won 60 MW Solar Power Projects in Karnataka in March 2016. The PowerPurchase Agreement has been signed in June 2016 and the commissioning of the plants isexpected by the end of FY 2016-17.

The in-principle approval has already been obtained for the Payments Bank and‘Aditya Birla Idea Payments Bank Ltd.' has been set up. We expect to commenceservices by the end of FY 2016-17 after the final approval from RBI.

In the Health Insurance sector we have already received FIPB approval. The finalapproval from IRDAI is awaited consequent to which your Company's Health Insurancebusiness will go on stream.

Your Company continues to invest in the growth opportunities in the existing businessportfolio.

I would also like to talk about two major developments at your Company.

With the de-merger of its Madura Fashion division into its subsidiary PantaloonsFashion & Retail Ltd. your Company has created India's largest pure play listedbranded apparel Company viz. ‘Aditya Birla Fashion & Retail Ltd.' (ABFRL). Thismove provides shareholders an opportunity to participate directly in the fashion spacethrough ABFRL.

With the FDI limit in the life insurance sector raised to 49% Sun Life Financial yourCompany's life insurance business' partner raised its stake in Birla Sun Life Insurance(BSLI) from 26% to 49% for ' 1664 Crore.

Aditya Birla Financial Services (ABFS) is one of the largest non-bank financialservices players in India. It ranks among the top 5 fund managers in India with over USD28.4 billion (' 184276 Crore) of assets under management.

Aditya Birla Finance Ltd. the NBFC business continues to grow ahead of the market.Its well diversified quality portfolio has reached USD 4 billion (' 25755 Crore) growingat an astounding rate of 47% year-on-year. The Housing Finance business has scaled up itsloan book to close to ' 2000 Crore.

Birla Sun Life Insurance has gained momentum in the individual life segment. It is thenumber 1 private life insurer in the Group segment. Birla Sun Life Asset Management hasimproved its equity AUM ranking to 4th in India.

MyUniverse India's number 1 online personal finance management portal enjoys thetrust of more than 2.6 million registered users who are managing close to ' 20000 Crorethrough this portal.

That ABFS has built a broad based and well- diversified portfolio with 12 lines ofbusiness segments in a short span despite being a nonbank player is indeed impressive.

In the telecom business Idea Cellular continues to outperform the industry. Ithas the enviable track record of being the fastest growing large Indian mobile operatorfor the 8th straight year with 14% annual revenue growth in FY 2015-16. Thatthe incremental market share of Idea was 44% over that of the preceding year is indeedcommendable. To capitalise on the data opportunity Idea is aggressively expanding its 3Gand 4G footprint leveraging its strong spectrum bank. On the back of its annual cashprofit generation of over ' 10000 Crore Idea is competitively well positioned to supportits growth plans.

Importantly the steady free cash flow generation from the Divisions cushions yourCompany's standalone balance sheet and supports its growth capital requirements.

Driven by the favourable gas pooling policy aimed at incentivising efficient ureaplants to maximise production Indo-Gulf Fertilisers recorded its highest-everproduction and sales volume.

Indian Rayon posted its highest ever earnings spurred by volume growth and betterrealisation in both the Viscose Filament Yarn and the Caustic Soda segments.

The profitability of Aditya Birla Insulators has improved. Regrettably newprojects have been adversely impacted as demand in the domestic market continues to besluggish given the financial health of the state utilities.

Jaya Shree Textiles sustained its profitability despite lower linen volumescompensated by higher woollen off-take. Plans to double your Company's linen yarn capacityfrom 3400 TPA to 6200 TPA are on the anvil.

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.

OUTLOOK

India is moving on to a higher growth trajectory and to that extent the sectors inwhich your Company is present are poised for a pick-up in growth.

With its ability to pool cash resources coupled with the proceeds from the stake salein the life insurance business and the steady free cash flow generation from Divisionsyour Company's standalone balance sheet is strong enough to fund its growth plans.

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 EBITDA 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 Chairman's Series launched last year for senior leaders in the areas of businessstrategy finance and personal leadership saw 150 of our senior most leaders recourse tothese 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 personal oversight.Up until now we have named 14 managers who have tremendous potential to rise to thestature 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 slot 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 percent 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 500e-learning modules in multiple languages. During the year over 25000 employees chose toaccess these programmes.

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 ourGroup's brand attractiveness has taken a quantum leap across 35 top B-Schools in India.Our Group features among the formidable Top-5 in the A C Nielsen - CRI Campus RecruitmentIndia Index 2015.

IN SUM

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.

Yours sincerely

Kumar Mangalam Birla

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