It gives me immense pleasure to inform you that your Company has performed well duringthe year 2016-17 with steady growth in profitability. This is despite the challengingexternal environment and slow-down in the industry with demand continuing to be sluggishand rural economy coming under stress. Your Company has successfully navigated thesechallenges and maintained same level of sales as of the previous year. However on accountof benign cost of inputs profit after tax increased to Rs. 22096 lacs registering agrowth of 11.60% over the previous Financial Year.
Your Company is focused on strategy to ensure growth in existing product portfolio andto expand its product portfolio for future growth thereby creating value for all itsstakeholders. In this line we are pleased to inform you that your Company has started aResearch and Development center to fuel innovation culture in the Company which willresult in growth for coming years. Despite pressure on business your Company hasmaintained profitability and continued the practice of rewarding its shareholders withhandsome dividends of Rs. 11.50 per share.
Your Company is fully geared up with GST framework and is ready for this transition.
The FMCG industry saw a mixed year during the Financial Year 2016-17. The year startedon a low note with consumption under strain from two consecutive years of drought. ByJune- July there were clear signals that the monsoons would be good and this raised thehope of a reversal in the economic parameters that defined GDP. By October the positivesigns were visible and the FMCG industry started to see volumes come back into staples aswell as discretionary products. The night of 8th of November changedthis and the announcement of demonetization changed the equation once more.
The resilient nature of the industry came to the fore and consumption was back byJanuary 2017. However demonetization has had a serious impact on the channels ofdistribution. This will be a lasting effect and we should see more and more consumerproducts rely on direct method of reaching retail outlets. Most FMCG companies have seen areduction in pipeline stocks especially at the wholesale level.
Towards the end of the year the industry was expecting an uptick in offtakes which didhappen only towards the later part of March 2017.
The last three years have seen difficult times for the FMCG industry. The double digitgrowths in most industry subsegments have now dropped to mid to low single digits. Withthe imminent implementation of GST in the first half of Financial Year 2017-18 we shouldsee more disruption. In the long run GST will bring in better control over the taxcollections and hence the economy will start growing at a faster pace again. However inthe short term the confusion regarding various aspects of GST implementation and also thepaperwork required by companies to be GST compliant will slow down the economy. FMCGindustry should also see a strain in the first half before things ease out and growth involumes start returning to the various sub-segments of the industry.
Bajaj Almond Drops
Despite the overall bleak scenario in the Hair Oil Industry our lead brand BajajAlmond Drops Hair Oil continues to show moderate growths both in Volumes and Market Share.Bajaj Almond Drops is the second largest brand in the overall hair oil segment and it is amarket leader with over 60 % market share of Light Hair Oil market.
We continue to focus on improving the distribution of our brands. The brand is beingsold through more than 7700 stockists and is now available in more than 3.72 millionretail outlets across the country. To improve the efficiency of our selling systems wehave invested heavily on automation and upgrading our ERP systems. The benefits of thisinitiative have started accruing and should accelerate efficiencies in the coming years.
While evaluating the business opportunities we could foresee huge scope ininternational business which is approximately 5% of turnover and would like to tap thismarket to have a double digit contribution to turnover from international business. Toachieve the same we have registered subsidiary offices in UAE & Bangladesh to ensurefocused business attention to the region & country. We are in continuous endeavor tostrengthen the international business in terms of increased penetration accessibility& availability of our brands to the consumers across the globe.
We are delighted to share that your Company is now a Great Place to Work'certified for building a high-trust and high- performance culture consistently for thecalendar year 2017 and is constantly implementing better systems and processes to buildand enhance leadership and functional skills at all levels in the organisation. We havebeen able to drive sustainable learning culture that is continuously enhancing performancecapabilities. In the changing scenario the competency frame work has been integrated withthe processes like talent acquisition enabling performance and individual andorganisational objectives.
Responsibility towards Society
Your Company undertakes its CSR activities through Kamalnayan Jamanalal BajajFoundation' ("Bajaj Foundation"). Bajaj Foundation with the vision of"Integrated development of the society through participatory approaches that setsbenchmarks and standards for others to emulate for sustainable development" empowersthe rural community to take charge of their own development in a participatory manner bydeveloping and managing natural resources. The developmental interventions focus onenhancing the income generated from agriculture which is the principal source oflivelihood. Bajaj Foundation also promotes alternate agro based livelihood opportunitiessuch as dairy farming organic farming horticulture and biogas which not only providesadditional steady income but allows rural community to get enhanced quality of life.
Going forward we shall continue to create value for our stakeholders through innovationacross product segments. We will strive for operational efficiencies through automationand effective system and process improvement. We remain committed for profitable andsustainable growth in years to come by upholding highest level of corporate governance andintegrity.
With warm regards
Kushagra Nayan Bajaj
Chairman (DIN 00017575)