It is my privilege as the Chairman and Managing Director to report the Company'sperformance and share the key highlights of FY 2019 and the strategic roadmap goingforward. As a Company we have always strived to better our past by continually deepeningour domain expertise adding value and expanding our product portfolio. Also oursteadfast focus on innovation and R&D has helped us evolve into a trusted engineeringand technology solution partner to leading global companies.
In global macro-economic terms CY 2018 was an eventful year. Despite a growth of 3.7%in GDP terms VUCA (Volatility Uncertainty Complexity and Ambiguity) prevailed. Factorsincluding concern over trade wars weak financial market sentiments and disruption inGermany's auto sector over the new vehicle fuel emission standards have weighed down theoutlook. Having said that CY 2018 was a strong year for the Company's main segments;global automotive and industrial sectors.
In India the economic scenario improved on the back of strong household spending andcorporate fundamentals. Sustained spending on infrastructure and defence supported by the'Make in India' movement kept the economy buoyant besides unlocking a virtuous cycle ofinvestment opportunities. The automotive demand after 5 years of strong volume growthacross all segments started to face headwinds in the form of increased costs on account ofregulatory and safety upgrades towards the latter part of FY 2019.
Performance review for the year
FY 2019 proved to be another positive year for the Company thanks to robust demandfrom the domestic and export markets across several sectors. Despite facing some macrochallenges in the latter part of the year we recorded the highest- ever turnover andprofitability even as we strengthened our balance sheet and improved our market position.The good progress we witnessed in each of our businesses was gratifying.
During the year we recorded a 23% growth in revenues to Rs. 65200 Million. Asignificant achievement has been balanced revenue generation from multiple streams. Wewitnessed some pressure on the bottom line which was driven by surging input costs ascommodity prices of steel and energy rose during the year. EBITDA and PAT increased by 19%to Rs. 18761 Million and 52% to Rs. 10713 Million respectively.
Our consolidated revenues also witnessed a strong performance with a top line growthof 21% to Rs. 101457 Million and PAT growth of 37% to Rs. 10326 Million.
Some of the salient highlights of the year on the domestic side included growth incommercial vehicle volumes driven by a pick-up in construction & infrastructureactivity; healthy demand from agri equipment and execution of defence orders. On theexports business front demand growth in the global truck and industrial sector andramp-up of the passenger vehicle program emerged as the key drivers.
Establishing new engines of growth
As a constantly-evolving organization we leverage our existing competencies intechnology and engineering to explore new growth opportunities. This is an essentialprocess to create additional revenue streams amplify growth and de-risk the business. Inline with this strategy we forayed into newer sectors such as Light-weighting technology(LWT) and e-mobility while also deepening our presence in the defence and aerospacesegments.
Defence and Aerospace
It has been an encouraging year for the defence business with revenues more thandoubling compared to FY 2018. We commenced execution of a Rs. 2000 Million- orderreceived in CY 2017 from the defence establishment and we are steadfastly working tocreate a steady revenue stream across domestic and export markets in the defencecomponents business.
Moving ahead our strategic priority shall entail graduating from the manufacturing ofcritical components to making sub-systems and systems. Being a technical field with highentry restrictions and long gestation defence has significant entry barriers in terms ofcapability and capacity. We have achieved reasonable success in defence exports with thesupport of the Government which resulted in several global enquiries. We envisageincreased opportunities on the back of higher defence budgetary allocation to strengthenIndia's security.
Aerospace is another technical field where we have established a commendable positionmaintaining good relationships with three prestigious clients in a short span of time.
With the Government's focus on indigenizing manufacturing we expect to create a robustecosystem with significant offset opportunities that we can leverage.
Light-weighting: The auto industry is witnessing large scale disruption because of newtechnologies including Hybrid Vehicles E-Vehicles Ride Sharing etc. These disruptionswill continue and BFL as a Company has to take steps to provide solutions to thesechanges. Light-weighting is currently a key focus area for automotive companies because ofits potential to reduce weight resulting in improved fuel efficiency and better range forE-Vehicles. To capitalize on the opportunity we have committed a capital investment ofRs. 2000 Million in the 1st phase for establishing a Center for Light-weightingTechnology (CLWT) which we expect to commercialize in the second half of CY 2019. TheCenter will focus on manufacturing aluminum components and undertake research onLight-weighting through composites and hydro-forming processes. This will help us attractnew business opportunities and grow our portfolio. We have already bagged orders fromdomestic and export OEMs and received expressions of interest from several potentialcustomers.
Aluminum forgings will be another focus area for Light-weighting. We currently supplyaluminum forgings to our customers in India and we are addressing global opportunitiesthrough our European manufacturing operations. We are expanding our capacity in Europe byinvesting around Euro 50 Million and are also contemplating setting up of a Greenfieldfacility in the US. These investments will increase the revenue contribution from theAluminium forging business in the European operations from the current levels of 20% toaround 40% in the next 5-7 years.
E-Mobility: This represents a large and growing global opportunity. We have startedmaking inroads in this segment through stake acquisition in Tork Motors and Tevva Motorsto scale our capabilities and gain access to their extensive R&D knowledge base. Wehave also set up an R&D center in MIRA Technology Park. Over the last couple of yearswe have worked on this segment by putting together building blocks at the componentsystem and technology levels. We expect activity in this segment to gather pace in thecoming years.
The vehicle electrification segment is at a nascent stage with concerns about capitalallocation and strategies. Extensive R&D will be required to arrive at the righttechnology solution. This will involve large investment in people capital and supplychain enhancement. This makes India an attractive destination given its low-costadvantage; and Bharat Forge a prospective partner given our proven capabilities andquality focus. The Government strongly supports this segment through incentivization andsubsidies which will benefit the industry and consumers. This is a huge opportunity thatrequires the right strategies to move ahead and succeed.
Pursuing growth through innovation
Innovation is central to everything we do. We are motivated by the need to stay aheadof technological advancements and market changes to emerge as the preferred globalpartner. R&D is our means to sustain this edge.
Our world-class R&D centers - KCTI (Kalyani Center for Technical Innovation) andKCMI (Kalyani Center for Manufacturing Innovation] are the two significant enablers forour innovation charter. These Centers work to augment knowledge and skills in advancedmaterials and technologies identify new opportunities in process improvement besidesundertaking new products and materials development.
During the year we commissioned Industry 4.0 Center of Excellence in partnership withPTC. The Center aims to incubate ideas related to digital transformation machine learningand artificial intelligence. These will contribute towards preventive maintenance costreduction productivity improvement product quality enhancement and faster time-to-market.
Countering business cyclicality
We operate in a cyclical business where demand varies according to the economicenvironment. Although we witnessed troughs and peaks it is pertinent to note that thetrend line of our business has always been on the rise. Capital investments in the rightareas focus on adding new customers and becoming preferred suppliers for existing onesin addition to initiatives for lower operating costs have placed us on the righttrajectory to counter the down cycles.
Moreover our investments in the businesses of aerospace defence and rail sector haveadded resilience by de-risking us from the primary automotive business. The lowervolatility of these ventures will provide the necessary cushion when we face challengingenvironments. Though these ventures are still in the nascent stages we are satisfied withtheir individual progress. Today we are amongst the top global companies withstrengthened capabilities and growing relationships.
Over the years one of our strategic strengths has been our ability to generate healthycash flows despite sustained capital investments in capacity creation and R&D. Weremain committed to making prudent financial decisions and maximizing cash flows so as toimprove our returns. This is essential for us to be able to pursue inorganic growth duringeconomic downturns.
We expect to witness fairly volatile and uncertain demand environment across sectorsand geographies. The Company's focus in the coming 12-18 months shall include reducingcost accelerating new product development maximizing free cash generation and exploringorganic/inorganic growth avenues.
Though Albert Einstein said these lines several decades ago we continue to incorporateit in our business outlook. Exactly a decade ago we were predominantly in the automotivespace. However we took a conscious decision to move out of this position and withsteadfast focus we built a multi-sectoral globally diversified organization withadditional revenue verticals that drive newer opportunities. This has steered us towards amodel which is more resilient and we continue to further strengthen it. We have ensuredthat we not only raise the bar in terms of performance but more importantly instill thehabit of executing our tasks with excellence. The hallmark of our work is that innovationand excellence propels performance.
In conclusion I thank each of our stakeholders for being a part of our exciting andenriching journey. We have built a business with a competitive edge. We have created anenabling ecosystem along with a product and technology pipeline.
Now it is all about scaling these to create added value for all the stakeholders.
B. N. Kalyani
Chairman and Managing Director