FROM THE DESK OF THE CHAIRMAN...
I am delighted to share with you the events developments and achievements of yourCompany during course of financial year 2015-16. The overall performance of your Companyhas witnessed a healthy growth in profits with consolidated Net Profit increasing by 68%in comparison with previous year. We have continued to do well in our core businesses andthe new ventures. The year has witnessed the value High Ground Enterprise continues tocreate for all its stakeholders.
In the year gone by we have taken significant steps to strengthen our businesses andare committed to continue investing in them for the future. The reforms in the Governmentpolicies have fashioned a transparent environment for doing business in India resulting inbetter governance. Your Company believes in following the best governance and transparencyin its business operations.
Infrastructure - Indian Scenario and Your Company:
Infrastructure sector is a key driver for the Indian economy. The Government of Indiais taking every possible initiative to boost the infrastructure sector. The sector ishighly responsible for propelling Indias overall development and enjoys intensefocus from Government for initiating policies that would ensure time-bound creation ofworld class infrastructure in the country. The Ministry of Road Transport and Highwaysand Shipping has announced the governments target of Rs. 25 trillion (US$ 376.53billion) investment in infrastructure over a period of three years which will include Rs.8 trillion (US$ 120.49 billion) for developing 27 industrial clusters and an additional Rs5 trillion (US$ 75.30 billion) for road railways and port connectivity projects. This hasopened a number of opportunities for Engineering Procurement and Construction Management(EPCM) entities like your Company across various sectors viz Oil and Gas WaterResource Management Road development Telecom Solid waste management Fire and Safetyand Consultancy. The Company has been currently working on expanding and diversifying itsofferings to capitalize on opportunities thrown open by such government initiatives.
Your company has completed TPC work for over 17000 retail outlets (Petrol Pumps) ofIOCL in over 1000 cities and towns in past three years this seems to have created a newbenchmark in the industry. During the year under review not only has your company baggedanother contract from IOCL to carry out inspection of its 7294 petrol pumps but alsobagged a contract from Hindustan Petroleum Corporation Limited (HPCL) for carrying out TPCaudits of SOP plus Club HP or Club HP Star integrated petrol pumps. These audits will becarried out initially only for SOP & Non Club HP retail outlets of HPCL. This TPC workwill be carried out in a span of 2 (two) years covering about 43000 petrol pumps acrossthe nation. Alongside with HPCL only we have also bagged contracts to install High mastsignages in 5 different states of India. During the year the Company has alsosuccessfully executed EPCM contracts for other clients like Gateway Rail
Freight Crest Logistics & Engineers HPCL Oriental Structure Engineers SIInfratel Patel Engineering Limited Shapoorji Pallonji. Further in pipeline are projectswith Valecha Engineering Ltd. Vadinar Oil Terminal Essar Bulk Terminal along others.
The revenue from EPCM business segment of the Company increased from Rs. 12535.08 lacsin the financial year 2014-15 to Rs. 19339.52 lacs in for the financial year 2015-16registering an year-on-year (YoY) growth of over 54%. The operating profits earned by theCompany from this business segment increased from Rs. 1345.01 lacs for the financial year2014-15 to Rs. 2165.40 lacs for the financial year 2015-16 registering year-on-year (YoY)growth of over 61 %. With new opportunities opening up in this sector and the expansionactivities undertaken by your Company the EPCM division of the Company will continue tobe a major growth driver for the Company going ahead.
Media and Allied Activities - Indian Scenario and Your Company:
The Indian Media and Entertainment (M&E) industry is a sunrise sector for theeconomy and is making high growth strides. Proving its resilience to the world the IndianM&E industry is on the cusp of a strong phase of growth backed by rising consumerdemand and improving advertising revenues. The industry has been largely driven byincreasing digitization and higher internet usage over the last decade. Internet hasalmost become a mainstream media for entertainment for most of the people.
During the year under review your Company under its home banner released a movie"Charlie Kay Chakkar Mein" starring the most prominent figure in Indian parallelcinema Mr. Naseerudin Shah.
Your Company is spearheading well in the advertising sector not only integrating mediaspace for prints and outdoors; but also developing content and executing on-lineproduction work for our advertising clients corporates like Bajaj Allianz Life InsuranceCo Ltd. Reliance Capital Asset Management Ltd. Bharti Axa Life Insurance Co. Ltd.Shemaroo Entertainment Ltd. Financial Technologies India Ltd. PNB Housing Toast Eventsalong others
Our Media division has reported a 3 year CAGR of ~39% despite witnessing aconsolidation phase in FY15. The media division contributes ~22% to our overall turnoverdown from +50% a couple of years back primarily on account of the fast pace at which ourEPCM division has grown at. That says we have taken a lot of steps in the last 12-15months to invigorate the growth in this division which should start paying dividends fromthis year onwards. We have done some small but synergistic Tie-ups and take-overs in theprevious years - Sunflower Advertising a 20 year old INS accredited full service Adagency and 361 Degree Entertainment (into the business of media management ResearchFilm marketing IPR and Content syndication) which will help strengthening our bargainingpower in the media buying and enable the company to enjoy better credit periods andincentives impacting us positively. Likewise setting up our own boutique post productionstudio in Colour Bar Pvt. Ltd. (Wholly Owned Subsidiary) and taking substantial stake inthe talent management & event company (MAGNIFIQUE - Chitra Talent Management Pvt.Ltd.) would help us immensely. These strategic tie-ups and takeovers will not only give usa bargaining edge by complimenting the services of each other but also cumulatively makesa larger bouquet with higher scope for growth.
The revenue from the media and allied business segment of the Company increased fromRs. 2859.17 lacs for the financial year 2014-15 to Rs. 5463.27 lacs for the financialyear 2015-16 registering a year-on-year (YoY) growth of over 91%. The operating profitsearned by the Company from this business segment increased from Rs. 123.73 11 lacs forthe financial year 2014-15 to Rs. 315.61 lacs for the financial year 2015-16 registeringa year-on-year (YoY) growth of 155%.
In view of the profits earned by the Company in both these segments it gives me greatpleasure to inform you that the Board of Directors of the Company has recommended aDividend of Re. 0.10 per equity share on a face value of Re. 1 per share for the year.Further in order to reward the shareholders of the Company the Board of Directors of theCompany has decided to declare a Bonus of 1:10 to all its existing shareholders.
Business Performance of Wholly Owned Subsidiaries
The Company in the last year has incorporated two wholly owned subsidiaries viz.Colour Bar Private Limited (CBPL) and HGEL Integrated PrivateLimited (HIPL).
In the year under review CBPL has started activities in the Media sector related toproviding technical and post production services for various content developers andproducers; alongside adding value to our current production expertise and to complementour in-house production. CBPL will heighten HGELs line production streams to developand create varied content for advertising internet/IPTV broadcast and other digitalplatforms.
HIPL has bagged a stone mining contract in Karota village of Haryana spread over 9.55hectares. This is a 10-year contract with an annual lease payment structure to the Haryanagovernment. HIPL has recently obtained the environmental clearance from The StateEnvironment Impact Assessment Authority (SEIAA) Haryana and also the Haryana StatePollution Control Board had granted Certificate to Operate (CTO) the Stone Mining.Pursuant to this approval the Company has commenced the mining operations at the site.This division is expected to contribute meaningfully to overall revenues from FY17 itself.
With these two subsidiaries catering to specific business needs the Company will be ina position to unlock the business potential from its core business sector of EPCM andAllied media business activities.
In the years ahead I hope that the steps taken by the Management of the Company willfructify in making the Company a leading player in the EPCM as well as the Allied mediasector."Crafting Opportunities Delivering Growth"; our tagline is wellfitting in with its relevance.
To conclude we have had a reasonably good year. We remain encouraged and confident ofachieving our long term objectives of inclusive sustainable and profitable growth. I amconfident that our disciplined strategy prudent approach focus on agile execution andour committed team will enable us to improve performance further and create greatershareholder value.
I would like to take this opportunity to thank all our employees for their contributionin the continued success of High Ground Enterprise. I would also like to extend mygratitude towards our business partners associates vendors and also our bankers theCentral Government and State Government agencies for their sustained support. I would alsolike to express my sincere appreciation to all of our shareholders for your continuedfaith trust encouragement and support.
Your support is the foundation on which this Company will scale new heights.
Sandeep R Arora
Chairman and Managing Director