The global economy recorded a healthy growth of 3.6% in 2018. During the second half ofthe year however the global economy lost some momentum mainly on account of theincreased trade frictions between the US and China and the tightening of financialconditions. International Monetary Fund (IMF) expects growth to decelerate to 3.3% in 2019and its projections suggest that all three major engines of the global economy viz. USChina and Euro area are likely to decelerate in 2019. On the positive side however IMFexpects world economic output to recover and grow at 3.6% in 2020.
Of late there have been a few growth- supportive factors such as the announcement ofeconomic stimulus in China and halt to the process of monetary policy tightening indeveloped countries. But the business sentiment has become somewhat clouded withchallenges arising from the apparent setback to the US-China trade talks the spread oftrade frictions to technology sectors and the increased intermingling of economicpolicies. These challenges signal that global commodity prices could be under pressure.
Indian economy exhibited mixed record in the just concluded fiscal. GDP growth slowedfrom 7.2% in FY18 to 6.8% in FY19. Sub-par rainfall in 2018 tight financial conditionsfaced by the non-banking financial sector and moderation of external demand were the keychallenges faced by the economy. Consumption growth declined during the second half of theyear but there were some signs of revival in the investment cycle as the rate of grossfixed capital formation improved from 31.4% of GDP in FY18 to 32.3% in FY19.
Macroeconomic stability indicators broadly maintained their health. Low inflation hascreated the space for monetary policy easing which will also help support growth revival.The fiscal deficit target for FY19 was adhered to despite a shortfall in tax revenues.While the current account deficit was high at 2.6% of GDP during the first three quartersof FY19 the softness in international oil prices portends its narrowing in the comingquarters. Following the resounding political mandate for the ruling Governmentexpectations of further economic reforms and impetus to large infrastructure investmentshave been reinforced. These are reflected in strong inflows in the capital market takingequity indices to record levels in the weeks following the general elections.
India's medium-term growth prospects continue to be robust. Significant reformsundertaken in the recent years such as GST and insolvency code would raise India's growthpotential in the coming years amplifying the effect of the long-term structuralcornerstones of the Indian growth story such as demography and urbanization. In thenear-term however uncertainty over the forthcoming monsoon season and the heightenedglobal risks present headwinds for FY20. Accordingly the outlook for the Indian economyin FY20 is one of cautious optimism at this juncture.
Your Company's Performance
Your Company recorded a turnover of र 8118 Crore in FY19; a growth of 13% over theprevious year linked to better performance across all its businesses. EBITDA grew to र 619Crore vis-a-vis र 501 Crore last year driven by improved profitability in our Lifestylebrands and Pantaloons segment. Your Company's profit after tax increased by 173% to र 321Crore from र 118 Crore last year.
Lifestyle brands - Louis Philippe Van Heusen Allen Solly and Peter England continueto be the leaders within their respective segments. With a deeply penetrated distributionnetwork across India these brands are synonymous with high-quality products contemporaryfashion and top-notch consumer experience. The business further expanded its scale throughnew store openings in untapped markets. Lifestyle brands took significant strides towardsadopting digital ways of working in their operations as well as consumer engagement andbrand building.
Pantaloons is a leading player in the value fashion segment with a network of 308stores across the country spanning over 4 million square feet. The business increased itsprofitability significantly through improvement in product quality design aestheticsmerchandise assortment increased brand investment and enhanced retail experience.
Your Company launched innerwear and athleisure under the brand name Van Heusen (VH) forMen in FY17. After its resounding success we also launched VH innerwear for women thisyear. Your Company considers this segment to become an important growth driver in comingyears.
I believe the overall economic outlook for global and Indian economies remainspositive. Rising consumer spending in the Indian market will lead to sustained growth inthe apparel sector. Your Company is well poised to leverage this opportunity through itsstrong brand portfolio varied product offerings and integrated multichannel play.
The Aditya Birla Group: In Perspective
The Aditya Birla Group in many ways is a proxy for a Rising India given thediversified nature of our businesses.
The year 2018-19 has been one of strategic decisions and partnerships; with manytransformational business transactions: Vodafone-Idea merger purchase of Binani Cementacquisition of Aleris in Metals and Soktas in Textiles. We have demonstrated the courageto think mega scale to act decisively and to be calm in a volatile and changingenvironment. We have reaffirmed the commitment and trust that we can reinvent ourselvesand be game changers in the industry. Consequently we are globally the third largestcement company (outside of China) and among the top 3 telecom players in the world. Weclosed the year with revenues of US $ 48.3 billion and an EBIDTA of US $ 6.1 billion.
We believe our people and people processes give us the definitive edge to manage scaleand yet remain nimble to embrace change proactively.
On the people front I am delighted to share that our robust people processes thathave been the bedrock of our success over the years continue to evolve and staycontemporary. Let me give you a flavour of what we have accomplished and how it is makinga difference.
As a Group we continue to be deeply invested in our talent pipeline across levels. Atone level we have on-boarded over 200 fresh recruits from top engineering and managementinstitutes for premier trainee programs and at the other end we are actively building aninternal talent pipeline in our businesses. Our Employee Value Proposition of 'A World OfOpportunities' is truly coming alive with this eclectic mix of experienced and youngleaders. We have developed a robust leadership pipeline with a healthy ratio of 1:1identified successors for more than 300 leadership roles across the Group.
Gyanodaya the Aditya Birla Group Centre for Leadership Development continues to buildcuriosity for new learning self-reflection and coaching in existing and future leaders.Broad-based leadership programs like Chairman Series brought 300 top leaders across theglobe together on marketing finance and strategy and built cohesion and crossfunctionalappreciation.
Functional Academies have been established in 5 distinct areas: Human ResourcesManufacturing Sales / Marketing and Customer Centricity Information Technology andFinance to develop cutting edge functional capabilities in these areas. Over the pastthree years over 5000 employees have refreshed their skills thereby enhancing thefunctional design and experience across the Group.
ABG Core Conclave of middle managers across businesses enabled 3000 managers andbusiness leaders to share nuances and have candid conversations on missed opportunitiesand challenges ahead. This unique platform reinforced the One ABG connect brought newperspectives and gave me a firsthand feel of the excitement passion and commitment of ourvibrant next generation leaders.
Businesses have adopted new areas like Robotic Process Automation ArtificialIntelligence Machine Learning Analytics Design thinking. They are experimenting withthe same in manufacturing processes servicing customers logistics enhancing the agilityof the business and turnaround times dramatically.
I believe the real test of HR processes lies in advancing business outcomes and wehave demonstrated a track record of doing just that. Greenfield projects were commissionedat earlier than planned time and at a lower cost acquired units were rebranded andrecommissioned in days instead of months earlier. While saving precious capital andrelated resources these initiatives inspire confidence within the organization and in theecosystem.
The Aditya Birla Group over the years has institutionalized best practices that haveled to efficiency safety sustainability and stronger Businesses. We have systematicallygot the customer to the centre of our Business discussions. As we continue to strive onthis front we need to get closer to the end consumer and innovate continuously to ensurea faster growth trajectory. With this in mind we have constituted the Central InnovationTeam. This team will not only build the innovation framework and pipeline but also get anoutside-in perspective to our Businesses. This team works closely with Business R&Dand Marketing teams Technology talent and a strong team of Data scientists. We are alsoin the process of evaluating partnerships with Global Universities and Startups relevantto the sectors in which we operate. The intent is to shift the Centre of gravity of theCompany closer to the consumer.
We are determined to innovate. We are determined to grow.
I am excited with the speed and precision with which we are transforming ourselves tobe future-focused while remaining steadfast to our time-tested values. We move into 2019with the confidence that we have the right capabilities not just to seize but pounce onevery opportunity that comes our way.
The best is yet to come. Thank you for your continuing support.
Kumar Mangalam Birla
Chairman Aditya Birla Group