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Bharat Gears Ltd.

BSE: 505688 Sector: Auto
NSE: BHARATGEAR ISIN Code: INE561C01019
BSE 05:30 | 01 Jan Bharat Gears Ltd
NSE 09:24 | 18 Jun 104.50 0.35
(0.34%)
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OPEN
CLOSE 106.60
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52-Week high 118.45
52-Week low 38.25
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Bharat Gears Ltd. (BHARATGEAR) - Chairman Speech

Company chairman speech

CHAIRMAN AND MANAGING DIRECTOR'S MESSAGE

Dear Shareholders

It is my privilege to present to you the Annual Report of your Company for FY 2019-20and share the key highlights and the strategic roadmap going forward. As a Company wehave always strived to better our performance by continually deepening our domainexpertise strengthening capabilities and expanding our product portfolio. Also ourunwavering focus on technology and R&D has made us a highly trusted partner forleading global companies.

MACRO-ECONOMIC SCENARIO

In global macro-economic terms 2019 was a challenging year. Factors including concernsover trade wars geopolitical tensions tight financial conditions and macroeconomicstrain in several emerging economies weighed down the outlook. The widespread outbreak ofCOVID-19 pandemic in the fourth quarter of FY 2020 forced the entire world into a lockdownand has infiicted a global economic recession. Societies business and economies have allsuffered as people have sequestered themselves from others to prevent the spread of thevirus. In India slowdown in consumption decline in private investment and liquidityconstraints in the non-banking finance sector combined with global trade slowdowncompressed growth. Stringent restrictions imposed to curtail the spread of the virus andthe subsequent nationwide lockdown have disrupted livelihoods supply chains and overalleconomic activity in the country. The crisis has dimmed the growth outlook for the globaleconomy for the coming year including for India.

SUPPORT MEASURES

A series of stimulus packages have been enforced by major economies and financialinstitutions to limit the economic fallout from the global pandemic. Particularly inIndia a mammoth Rs. 20 lakh crores economic package has been announced under the‘Atmanirbhar Bharat Abhiyan' to help the economy tide over the crisis. Being one ofthe biggest relief packages it focusses on making India self-reliant and places specialemphasis on medium and small businesses agriculture labourers urban and rural poor.Along with this the Reserve Bank of India (RBI) has also announced a couple of measuresincluding rate cuts loan repayment moratorium additional liquidity support etc. tomaintain financial stability.

INDUSTRY REVIEW

The automotive sector is one of India's core industry and plays a vital role in thegrowth of the Indian economy. Increasing consumption demand mass urbanisation burgeoningworking population and easy accessibility of finance are the key drivers for growth ofthis industry. However the sector witnessed some challenges during the year due tooverall economic slowdown credit crunch low consumer spending higher purchase costs andtransition to newer emission standards. Further the rapid spread of COVID-19 pandemic hassignificantly impacted the automotive sector in India. Economic slowdown supply chaindisruptions and shutdown of manufacturing units have crippled production and import ofautomotive components. Further consumer sentiment is seen plummeting on account ofgrowing uncertainty surrounding the pandemic. On the positive side however the Indianauto component industry could emerge as an alternative source of supply for key markets.

GROWTH PROSPECTS

India is fast emerging global hub for automobile and automotive component manufacturingowing to its cost-effective manufacturing availability of skilled labour and rawmaterials and being geographically closer to key automotive markets. Growth in commercialvehicles is expected to pick up driven by increased infrastructure spending proposedvehicle scrappage policy and feet replacement demand. Government's ambitiousinfrastructure programmes and fast-tracking of ongoing projects will contribute to demandgrowth of construction equipment.

PERFORMANCE REVIEW FOR THE YEAR

FY 2019-20 was a challenging year for your Company. During the year our gross revenuefell Rs. 131.15 crores to Rs. 468.00 crores from Rs. 599.15 crores in the previous year.There is a net loss of Rs. 18.78 crores as compared to net profit of Rs. 12.53 crores inFY 2018-19.

The gears business saw a slump of Rs. 115.95 crores to Rs. 408.04 crores down from Rs.523.99 crores in FY 2018-19.

Even though our results were affected by external conditions we did not pause in ourcommitment to invest in our business. This ensures that we are strongly positioned tostrengthen our business over the coming years and move to a high growth trajectory.

STRENGTHENING DYNAMICS

Over the years we have worked hard to maintain our position as one of the prominentindustry leaders. Today we are the preferred supplier of automotive gears to a wide rangeof industries and leading OEMs across the world. Our diverse product basket technologycompetence talented team and zeal to make a difference for our customers give us theconfidence of embracing the headwinds and moving ahead.

Innovation is a key differentiator for us. We have always strived to derive an edge byenhancing our manufacturing capabilities and creating technological breakthroughs for ourcustomers. In line with this strategy we continue to leverage our existing competenciesin technology and engineering to explore new growth opportunities. Technology upgradationand process innovations are the major focus areas for your Company. Through retrofittingand refurbishing of machines we aim to continuously enhance our productivity andefficiency. Robotics in furnace division highly automated operations and installation offinest equipment and machinery are some of the other salient highlights. I believe thatthese will contribute towards cost reduction productivity improvement new productdevelopment quality enhancement and faster time-to-market.

Having incurred significant investments over the last two years we are controlling ourcapital expenditure spends. We continue to pursue with consolidation of capex andmodernisation of existing capacities with a strategic focus on cost controls andincreasing margins.

ACCELERATING PORTFOLIO EXPANSION

We are expanding our business to include new and innovative market leading productsthat are aligned with customer needs. Our product mix comprises a range of gears andshafts along with spiral bevel gears and differential gears. We have also developedmultiple CW&P ratios for a new HCV model for one of our major customer. You would bedelighted to know that your Company is also exploring opportunities in laser hydraulicparts and components for passenger cars. This will help us to attract new businessopportunities and grow our portfolio.

EXPANDING CUSTOMER BASE

We are working towards increasing our customer base by way of tapping newer segmentsand strengthening our export business particularly in North American and Europeanmarkets. We continue to focus on reducing our dependence on agricultural segment andincrease volumes in automotive and construction equipment industries. Our aim is tominimise the risk of segment concentration. With the replacement market continuing to showabundant opportunities we intend to bolster our share in the aftermarket segment. At thesame time we are augmenting our global footprint across major markets of North Americaand Europe. Our endeavour is to become a global player with presence across countries andgrowing our domestic business. I am quite confident that our team has the will and theskills to drive our business forward.

BUSINESS OUTLOOK

Though the short-term economic outlook may appear gloomier in the wake of the pandemicgovernment stimulus package and gradual resumption of economic activities are expected torevive consumer sentiment. Sustained spending on infrastructure and thrust on domesticmanufacturing will lead to a rise in business activity. Measures such as reduced tax ratesfor individuals and greater allocations to agriculture and allied sectors will invigorateconsumption and boost the rural economy. With the rapidly changing landscape in theautomotive market it is exciting to see what opportunities it holds for the business.Electric vehicles and stricter emission norms are the trends shaping the direction of theindustry. Extensive R&D will be required to bring the right technology solution. Thiswill involve huge investments in people products capital technology and newer markets.For us this scale of change is a boost to our growth strategy. Further there is apositive focus towards agriculture and infrastructure segments which will benefit therespective business divisions and drive momentum for your Company.

As we prepare ourselves for the next phase of growth we are taking strategic steps toachieve strength and scale. We are leveraging pioneer technologies maximising operationalefficiencies developing world-class products to expand presence reducing costs andenhancing equipment efficiency to achieve economies of scale. We are progressing with ourfocus on tomorrow's need while gearing up for it today.

ACKNOWLEDGEMENT

I would like to extend my sincerest gratitude to our employees customers partnersbusiness associates and our stakeholders for their undying faith and support. Each one hasbeen a part of our exciting and enriching journey. We continue to seek value creation forour stakeholders and persevere in building a sustainable business. Here is hoping for abrighter and stronger future together.

Warm Regards

Surinder Paul Kanwar

Chairman & Managing Director