i WHOLE TIME
DIRECTOR S MESSAGE]
The year 2015-2016 was an eventful year in the history of the company. Welspun SyntexLimited was renamed as AYM Syntex Limited.
The transformation journey of this company had begun more than 5 years back. Strategyis nothing but choosing the better option amongst various good ones. Sacrificingshort-term top line growth the management at the company took a conscious call to focuson niche product lines in Nylon and Polyester as opposed to competing on cost againstgiants in commodity segments. Their relentless efforts unwavering faith and dedicationled to the company turning around from a loss making enterprise to a profitable one. Theresult was profound. More than 43% compounded growth rate in profitability over 5 years20%+ ROCE and more than 50% of current production coming from products that did not existin the portfolio of the company 5 years back.
I look at this name change as the rebirth of the company. Personally I am a hugebeliever of the teachings of Warren Buffet and Charlie Munger. What separates them frommost other investors (and businessmen!) is their focus on the extreme long term. In anutshell they believe that businesses that have and maintain a "moat" or acompetitive advantage something that differentiates them from their competitors are theones most likely to survive grow and create value in the long term.
While we are proud to be where we are when we consider our predicament in 2010 ourbusiness needs to evolve. A lot of our profitability is coming from external factors suchas government incentives and market supply demand mismatches as opposed to our inherentstrengths. To expand capacities in such a situation would give us the short termsatisfaction of growing top line and even bottom line but we may go on to regret many ofthese investments down the road as some of these positive externalities might not becontrollable. Furthermore executing and filling up these capacities would defocus themanagement from the real task at hand - i.e. build competitive advantage! As many of youreading this letter would agree capital allocation is as much allocation of money as itis allocation of leadership mind space.
Transformation of organizational mental models and cultural change is a painfully timeconsuming process. Results take years to show. However just as Jim Collins the author ofthe bestselling book "Good to Great" puts it if the leadership of theorganization maintains single minded focus free of distraction and keeps pushing the"flywheel" in the same direction one day the momentum towards thetransformation will be large enough to effect a noticeable change. Our organization todayis in the middle of a similar transformational journey. We see New Product Development andInnovation as keys to unlocking sustainable competitive advantage in a highly competitivespace. However to go from having less than 5% of our sales coming from innovations (whichis where we are today) to 40-50% plus (which is where the global leaders are) will be agradual process. What I am extremely clear about however is that while we don't need towait for that number to reach 50% large scale capacity expansions can only take placeonce there are visible signs that we have started to move in a positive direction on thisfront. Until then we need to get ourselves ready - invest in acquisition and developmentof talent align the team build processes and capability upgrade lab and machineries andbuild infrastructure to support future growth. This might not give us the pleasure ofimmediate growth but they are vital if we want to grow seamlessly without bottlenecks inthe future. Imagine how relatively fast effortless capital efficient and profitablegrowth can be once we have our bearings in place in this regard.
I would like to end this letter on a note of thanks to all our key team members who Ithrough their hard work and persistence have brought our company to a stage where we canthink about competitive advantage as opposed to mere survival and also to all ourshareholders who continue to have faith in us.
Whole Time Director
AYM Syntex Ltd.