The one characteristic that has defined the global economy over the last decade or sois "uncertainty" uncertainty that has brought its share of challenges andopportunities. The year 2016-17 had its share of uncertainty which affected theperformance of the Company both domestically as well as in the international marketswhere the Company operates. Let me take this opportunity to take you through the keyhighlights of the Company's performance during the financial year 2016-17.
The single biggest event that left its mark on each and every sector of the domesticeconomy was "demonetisation". Coming at a time when the economy was justbeginning to look up the Central Government's decision to demonetise almost 86% of thecurrency notes in circulation caused severe cash shortage in the domestic economy whichprefers cash as the mode of payments even today. This cash shortage led to a strain onthe consumption demand and business activity for a greater part of the second half of theyear. Stressed loans plaguing the banking sector and the stretched corporate balancesheets continued to be a drag on capital investments which have remained much below thetrends over the past few years. Low inflation and a largely accommodative monetary policythough provided support in an otherwise difficult growth environment. On the globalfront the Brexit vote and the surprise election outcome in US further underlined theuncertainty that persists across the markets. While such events might appear to havelimited direct consequences for our domestic economy the inter-linkages of global tradeand financial markets mean that no economy is totally insulated. The large capital flightaway from emerging markets including India in the aftermath of the US election resultson the hopes of strong pro-US growth policy rollouts by the new US dispensation and thesubsequent swift and massive reversal back into the emerging markets towards the close ofthe financial year highlight the fickleness of today's uncertain times.
Against this uncertain backdrop and the demonetisation move right after the festiveseason the Company has managed to register good growth in the domestic market. TheCompany had a strong focus on consumer upgradation thereby improving the product mix andalso continued to work on expanding its product portfolio. The Company leads with thevision of being the forerunner of inspiring dcor & partnering with consumers intransforming their living spaces. The Company is looking at scaling up its flagship APHomes store concept which was launched at Coimbatore last year. AP Homes is amulti-category dcor store where a consumer can avail an integrated dcor consultancyacross categories ranging from paints bath fittings kitchen sanitary ware wallpapersfurniture etc. The Company also launched www.beautifulhomes.com an online dcormagazine that will feature inspirational Indian homes and workspaces practical dcortips accessible design ideas and Do It Yourself (DIY) guides to further support thedcor needs of the consumers. These initiatives would help drive differentiation andenhance the leadership position of the Company in the domestic market.
With the vision of being a complete dcor solutions provider the Company had forayedin the Home Improvement segment with investments in the Kitchen and Bath business. Whiledemand conditions in both these businesses were impacted due to demonetisation andslowdown in real estate and construction arena the Company has taken steps to improve itscapability to drive these businesses over the coming years.
The Company's two joint ventures with PPG Industries Inc USA in the Industrial andAutomotive coatings segments fared well during the year. Profitability of these businessesimproved on the back of favourable raw material prices and aided by better sourcing andlocalisation strategies.
In the international operations some of the key markets faced challenging businessconditions due to the subdued economic environment in those countries. However most ofour units in those countries managed to tide over the challenges and delivered strongperformance. The Company started commercial operations in Indonesia through tie-ups withbusiness partners and is also working on completing the setting up of its ownmanufacturing facility with an initial capacity of 5000 KL per annum. The Company hasrecently acquired 100% stake in Causeway Paints Lanka (Pvt) Ltd. Sri Lanka aleading player in the Sri Lankan coatings market and this would help it further strengthenits international footprint.
While the Company weathered its way through the uncertain environment it continued todrive its commitment on social responsibility agenda in areas like Education Health &Hygiene and Water Management. Lot of work has been undertaken at the manufacturingfacilities in the area of environmental sustainability like achieving water-neutrality byinvesting in community rainwater harvesting structures reducing non-process fresh waterconsumption and reducing trade-effluent and waste generation. During the year the Companymade further investments in renewable energy to reduce its carbon footprint and drivesustainability. Almost 22% of the power requirement at the manufacturing facilities isbeing met through renewable energy sources.
The new accounting standards Ind AS have become effective from 1stApril 2016 and the financial statements presented in this Annual Report comply with thesenew accounting standards. The Company has further strengthened its internal controls andgovernance framework by rolling out a comprehensive compliance requirement guideline toits international subsidiaries. As always the Company strives to enhance its internalcontrols and governance standards as a matter of ethical responsibility to all itsstakeholders and not merely as a regulatory requirement.
The new financial year has started on an encouraging note with the Government seenkeenly pushing the implementation of the Goods and Services Tax (GST) from the secondquarter of the financial year. GST is being looked at as the single biggest indirect taxreform and is poised to push India's economic growth forward by creating a single nationalmarket and enhancing the efficiency of inter-state movement of goods and services.However given the wide scale of implementation it is likely to cause some disruptions inthe initial period and the Company will have to face this hurdle as it adapts to this newlandscape. The initial forecasts on monsoon are also encouraging and this gives hope for astrong consumption demand from the rural segment. On the other hand raw material priceshave moved up significantly over the last few quarters putting pressure on margins. In theInternational markets political stability in key markets of Egypt Bangladesh and Nepalwould be the key for sustained performance.
As we move forward the vagaries of uncertain environment would continue to confrontall the businesses. The Company is confident of navigating these uncertainties and wouldcontinue to invest in its capabilities to understand and deliver offerings to satisfy theconsumer needs in our quest to deliver sustainable long-term performance. I take thisopportunity to thank all our stakeholders for the faith reposed in the Company and lookforward to your continued support in this journey.