Hero commenced its journey over three decades ago with a bold vision of bringingworld-class mobility solutions and technologies into India and in the process making thecountry more self-reliant. Brand Hero has had an undeniable role in India's industrialtransformation.
Since then through dedicated and sincere hard-work your Company has cemented itsdistinct place in history and has become a beacon of excellence for the entire industry.Today Hero MotoCorp is a globally recognised responsible ethical organisation whichcontinues to play a significant role in nation building. Going forward we stand committedto unceasing enhancement our products processes quality and customer orientation.
As is customary this year's Annual Report attempts to give you a detailed analysis ofyour Company's working objectives challenges and opportunities.
Let me begin by congratulating everyone in the Hero family for once again putting up astellar performance in the year gone by. Complementing the rich legacy of Dr. BrijmohanLall Hero MotoCorp has evolved to become a reputable institution. In an environmentmarked by volatilities and intense competition your Company completed yet anotherfinancial year (FY 2016-17) retaining its dominant market leadership of the two-wheelerindustry. Your Company has now been the World's largest two-wheeler manufacturer for anincredible 16 consecutive years!
I would like to share with you a significant update on the leadership transitions ofthe Company.
Mr. Ravi Sud superannuated from the position of Chief Financial Officer with effectfrom March 31st 2017 and is now an Advisor to the Company. I take this opportunity tothank Ravi for his valuable contribution over the years. Mr. Niranjan Kumar Gupta hasjoined us and taken over the charge from Ravi.
THE INDIA STORY
India is passing through one of its most economically and politically stable phases inthe recent history. The strong decisive government at the Centre supported by stablegovernments in the states has ushered in a period of good governance in most parts of thecountry. The gross domestic product (GDP) growth has held steady at 6.5-7% while reducedinflation and fiscal deficit have led to positivity in the sentiments. However for growthin the global economy to revive and the currency situation to improve a lot depends onhow the socio and geo-political landscape unfolds in the backdrop of developments indifferent parts of the world. It is in this backdrop that I view the political resolve ofleaders back at home with a sense of pride. We have been able to clear multiplelongstanding differences on policy decisions including the passing of the bankruptcycode and stringent regulations to govern real estate. We are in the process of adoptingthe one country one tax' in the shape of GST. These are all indeed commendableachievements.
The state governments competing with each other to attract investments into theirrespective states has resulted in a healthy even-spread of investments across differentparts of the country. Thus industrial growth and the consequent socio-economic developmentis expected to spread across country rather than being concentrated in and around certaintraditional pockets.
The banning of Rs. 500 and Rs. 1000 currency notes Demonetisation' as ithas come to be called in November 2016 was an enormously bold move by thegovernment one which only a visionary and a strong leader could have taken. It was indeeda game-changing move.
At Hero MotoCorp we too faced some discomfort in the initial few months of thedemonetisation initiative but we were willing to go through that phase for the largergood of the country. We took speedy steps to further encourage sales through the bankingchannels installed point of sale (POS) machines and other devices of cashlesstransactions at our dealerships. By February 2017 a clear bounce-back in terms ofconsumer sentiments was visible in the sector.
Towards the end of FY 2016-17 the auto-industry had to pass through uncertain times onaccount of the transition of emission regulations from Bharat Stage III (BS III) to BS IV.At Hero MotoCorp safeguarding of environment has always taken precedence over short-termfinancial benefits. Personally I have always been a strong votary of cleaner environmentand use of green technologies. For instance one of the Company's manufacturing facilitiesis baptised Garden Factory' for using advanced state-of-the-art technologies andenvironment-friendly manufacturing practices. We have expanded the implementation of ourin-house developed and patented i3S (idle Stop-Start System) technology on the majority ofour products. The i3S system is an environmentally friendly technology that reducesemissions by automatically shutting-off the engine at traffic stops; while also providingsavings and convenience to the customers.
As a responsible and law-abiding corporate citizen and in keeping with our commitmentto protect public health Hero MotoCorp had proactively switched to manufacturing only BSIV compliant vehicles well before the date stipulated by the authorities. Also keeping inmind the ordeals of our dealer partners we implemented some tactical steps and alsoincentivised the customers to liquidate the balance BS III stocks before the end of thefinancial year. As a public limited Company we thereby minimised the losses of all ourstakeholders. I am happy to inform you that since then customers have given a positiveendorsement to our BS IV vehicles!
In keeping with this spirit we have already started our preparations for the launch ofBS VI models and are aiming to launch BS VI compliant products well before the proposedtimeline in 2020.
THE HERO HOMEGROWN FOR THE WORLD
Symbolising the true empowerment of millions of Indians your Company surpassed thelandmark of 70 million units in cumulative sales since its inception during the FY2016-17. The year was even more significant as we introduced the Splendor iSmart 110Achiever 150 and the Glamour 125 three new models completely designed and developedby our in-house engineers at the Centre of Innovation and Technology (CIT) firmlyestablishing Hero's capabilities in independently developing new products.
Even as the consolidation of leadership in the domestic market continues your Companyalso keeps expanding on the global front. With the addition of Nigeria and Argentina the largest two-wheeler market in Africa and the second largest two-wheeler marketin Latin America respectively - the global footprint of your Company has now reached 35countries spread across Asia Africa and South and Central America. With this we havetaken a giant leap towards our stated vision of making Hero' a truly global brandand befittingly received the prestigious Indian MNC of Year' award from the AllIndia Management Association (AIMA).
FY 2016-17 also had the distinction of witnessing the unveiling of two new Heroproducts on foreign soil. In January 2017 the new Glamour 125 (named Ignitor ininternational markets) became the first Hero product to be launched globally at aglittering ceremony in Buenos Aires Argentina and in November 2016 HF Dawn specially designed for the African market - was showcased at the EICMA in Milan Italy.
There have been strong headwinds in the global economies with an extremely volatilecurrency situation. I however believe that these are cyclical situations and can be workedthrough in the long-term. Hero would therefore stay invested in its global markets andcontinue to engage in brand building so that when the market situation improves we arewell prepared to leverage the conditions.
In keeping with our aspiration to become a truly global brand your Company forayedinto motorsports with a rally racing team Hero MotoSports Team Rally' through astrategic partnership with Speedbrain GmbH. In its debut year itself the Team delivered aremarkable performance at the prestigious and arduous Dakar Rally 2017 putting theIndia and Hero flags on a prestigious global platform.
The game of football is a passion in Latin America and it is through this platform thatwe are reaching out to the youth in that region. We have brought on board Argentinianfootball legend and the coach of Atletico de Madrid team Diegeo Simione asour brand ambassador in Argentina.
Similarly we are building our brand in the Caribbean even before our commercial launchin that market. Your Company is the Title Sponsor of the Hero Caribbean Premier League a highly popular T20 cricket tournament. Our association with Tiger Woods and theTiger Woods Foundation has already helped us build awareness about Brand Hero globally.
THE ROAD AHEAD
In the new fiscal (FY 2017-18) we are looking at aggressive market share gains tofurther consolidate our leadership without compromising on the bottom line and ourmargins.
We have planned a capital expenditure of around Rs. 2500 crores for the next twofiscals up to FY 2018-19 towards new product development digitisation phase-wisecapacity installation and expansion of our existing facility at Gujarat and our upcomingplants in Andhra Pradesh & Bangladesh. This CAPEX also includes investments towardsup-gradation and modernisation of our existing plant machinery. We are looking forward tocommencing production at our upcoming manufacturing facility in Bangladesh in FY 2017-18our second manufacturing facility at a global location following the facility in CaliColombia.
The four new products that we introduced in the month of March 2016 all newGlamour 125 the revamped new Maestro Edge Duet and the Pleasure 10th Anniversaryedition are expected to add to our sales performance in FY 2017-18.
Furthermore we have lined up half a dozen new products - across segments includingthe premium and scooter categories - for launch in the next fiscal to drive our growth.Clearly we are going to have enhanced focus on these two growing segments to make rapidmake inroads with new products and innovative customer engagement and communication.
While the Company continues to expand its product portfolio we are simultaneouslylooking at mobility solutions for the future also. One such area that is fast developingis the electric' vehicle category. Even as we build our own internal capacities oneof our strategic priorities is to also engage with the external ecosystem includingstart-ups in a meaningful way. It is with this objective that we have made an investmentin Ather Energy one of the best start-ups in the two-wheeler EV space.
Even as we go for market share gains Hero will preserve its unwavering focus onsustaining a healthy bottom line and margins through judicious utilisation of resourcesand rationalisation of costs. At Hero quality is not important just for the externalcustomers it is equally important for internal customers also! Thus we will put addedfocus on quality.
Finally I would like to thank all our customers my colleagues across the Hero familydealers suppliers professionals associates global partners and you our shareholdersfor your unwavering support. We would not be here but for your trust in us. Thank you toall the government officials as well for their support and understanding. I appreciate andcherish the faith we have been bestowed with from everyone.
Chairman Managing Director & CEO