Dear Shareholders "The pursuit of excellence" is a corporate strategyonomieshave that we have always followed diligently. Our challenge has been to adapt to thechanging landscape as swiftly as possible while continuing to accelerate thegrowthfinancialconditions engine. It is deeply encouraging for me to see every member ofour global family rising to the challenge and making BFL stronger and more sustainable.Continuous learning and innovation has enabled us to think faster than the industryevolve smarteronsolidation complemented solutions for discerning customers andseek newercording growth markets across geographies.
We continue our determined transformation
If we look at the external landscape wefind global returned to the path of recovery.However an escalating cycle of trade restrictions and retaliations by major economies mayadversely impact growth. Economic activity across the world expanded close to 3% in 2017making it the best year since the post-crash rebound of 2010 with markets stimulated bylow inflation and accommodative monetary policies. are likely Global to remain positivewhile strong sentiment will help meet the robust demand especially in investment andconsumption.
Emerging markets in Asia continue to be the primary growth driver globally. Howeveruncertainties surrounding the business environment preclude optimism as monetary easingin some countries protective policies in developed nations and sluggish growth of theChinese economy require close monitoring.
Despite challenges India has demonstrated a resolve to achieve by fiscal wide-rangingand aggressive polices. The economy grew by 6.7% in the official currentfiscal estimatescompared to 7.1% in 2016-17. The year 2017 was marked by several key structuralinitiatives to ensure sustainable growth.
Setting a new benchmark
For BFL the year gone by has been the best year on record with the highest everrevenue and profitability. The consolidated income for 2017-18 stood at 8358 crorecompared to 6396 crore in 2016-17 a growth of 30.7%. PBT before exceptional item andexchange gain/(loss) stood at 1347 crore vis-a-vis 839 crore in 2016-17 up 60.5%. On astandalone basis total income surged from 3865 crore . in 2016-17 to 5316 crore a37.5% increase. The performance has been driven by growth in all our segments acrossdomestic and international markets.
On the balance sheet side we have achieved the target of becoming a net debt freecompany. We have come a long way from a relatively high-debt company to a cash-surpluscompany. As of March 31 2018 our long-term debt/ equity (net of cash) stood at (0.06).The performance of our overseas subsidiaries continues to improve driven primarily by ashift towards light weighting coupled with a focus on productivity and costrationalization. I believe our subsidiaries are on the right track; and will benefit froma global trend from steel to aluminium usage driven by a need for light weighting.
The automotive industry is changing rapidly and we can take advantage of opportunitiesin emerging areas like light weighting electrification and new mobility concepts. Insteadof being disrupted we choose to be a part of this transformation. As a carefully craftedstrategy during the year we fostered new partnerships that enables us to be a part ofthe change.
Set up center for Light Weighting Technology (LWT) a fully-automated manufacturingfacility in Andhra Pradesh. It will design and manufacture components for automotive andindustrial applications with commercial production expected to start in CY 2019
Made a strategic investment of 45% stake in an Electric Vehicle (EV) start-up TorkMotorcycles
Opened a new research and development facility at MIRA Technology Park UK a leadingautomotive technology park and enterprise zone. The center will focus on the developmentof components and sub-systems for EVs As we embark upon another transformation I wouldlike to take this opportunity to look back at what we accomplished so far; andaddress tgrowth driver the key changes we are envisaging over the coming years. The precedingbusiness transformations focused on technology up gradation foraying into new sectorswidening of customer base and more importantly it resulted in building a sound knowledgebase about metallurgy and metal forming. The transformations also created manyfirst-time-India' milestones.
1990s: First Company to set up a 16000T press in India
Early 2000s: First Company to take the inorganic route in the manufacturing industry.The deal also provided us access to global oil and gas markets
2008: First Company to set up state-of-the-art capacity to address critical industrialsectors for forgings requirements across Oil & Gas Construction & MiningRailways Aerospace and Defence
2012: First Company to address the global commodities/energy sector
2015: First Company to be part of aerospace global supply chain for criticalcomponents. Over the next few years I expect the Company's profile to undergo a steadychange driven by the following:
Expanding product portfolio:
Our new product pipeline focused on transmission and driveline components coupledwith the investment in Nellore for setting up the Center for Light Weighting Technologyis expected to be for the Company. More importantly these initiatives will enable furtherdiversification of the revenue stream creating resilience during downturns
Opportunities in aerospace:
This sector continues to be of importance despite its slower than anticipated pace ofprogress. We are confident of growing this business through new product development andcustomer acquisitions. This business has a long gestation period and does take time beforeseeing any major momentum.
Defence components: The business primarily focuses on supplying criticalcomponents to various defence agencies. With the Government's enhanced focus onindigenization we expect this business to grow at a healthy pace driven by new productsand systems development. We are making steady progress in the business and we areencouraged by the response of the defence establishment.
Defence equipment: As you may be already aware our ambition is to becomea full supplier of indigenously developed system for defence sector leveraging themetallurgical and metal forming skillsets. Your Company has identified areas key beingartillery and land systems where we believe an opportunity exists for new players. The155mm/52-calibre Advanced Towed Artillery Gun System (ATAGS) jointly designed anddeveloped by Bharat Forge along with Defence Research and Development Organisation (DRDO)set a world record during firing at Pokhran. Over the past few years we have developed ahost of products with a significant level of indigenization with the capability to scaleup very fast as soon as a major maiden order comes our way.
Advancing technology prowess
We continue our endeavour to diversify and manufacture high-quality products that drivechange and sustainability. Our R&D team develops technologies to minimize the carbonfootprint and manufacture light-weight products that result in lower energy consumption.For us innovation is an ongoing process helping us explore new ideas and delivertransformative solutions. Smart manufacturing or Industry 4.0 is a key enabler that canhelp India realise the goals of Make in India'. We have been proactively investingin machines and in enhancing people skills to realise Industry 4.0 standards. We haveadopted multiple measures (light-weighting of components new product development focusedon the entire powertrain and emission solutions) to leverage emerging prospects arisingfrom the technological upgradation required to meet the emission norm applicable from2020.
Investing in people
The collective capabilities of our people have taken us far and we will continue toinvest in developing our team to sharpen their capabilities and introduce industry-leadingpractices. We are also working to instill a corporate culture that enables teams to takeinitiatives and explore new opportunities. It is only through consistent innovation andempowerment of our people that we will be able to sustain our leadership in our focusareas.
Our people are passionate about thinking ahead of the curve and accelerating the paceof innovation in this period of dramatic change. We value each other's individuality andsystem of beliefs and work together to enhance their own capabilities. It is thisenvironment that enables us to incubate new ideas that can change the future. We arere-training more than 2500 employees on digital manufacturing artificial intelligenceand machine learning etc. For this we have set up 4 labs including PTC's ThingWorxInternet of Things (IoT) platform. Through such retraining initiatives we are creatingnew capabilities in our people for the future.
We will continue to build on our strong foundation and achievements and take long andconfident strides in our journey. We have strong growth models and a streamlinedorganization. We know where we are heading and in great measure how we are going to getthere. We continue to enhance and implement our strategies to sequentially advance ouroperational framework for long-term shareholder value creation. As our initiatives bearfruit allowing us to leverage new opportunities we are convinced that we can deliverfurther profitable growth in 2019. I take this opportunity to thank our shareholders fortheir continued trust and support. I would also like to thank all our stakeholders andbankers for supporting our vision and initiatives.
B. N. Kalyani
Chairman & Managing Director